Cash flow monitoring, predicting are vital

Tips For Small Business

June 08, 2008|By Stephen L. Rosenstein

Monitoring cash flow is vital to the well-being of your business. Minor "hiccups" can be expected, but they also can be an early warning of larger problems ahead, especially if other indicators such as sales seem positive.

Though critically important, monitoring and predicting cash flow is a matter of consistently following some common-sense financial management practices.

The object is to make certain that more cash enters your business than exits.

First, you need to translate sales into real money as quickly as possible. Once you have collected the cash, your business needs to guard it. Surprises such as slow or nonpaying customers and unexpected expenses are your worse cash-flow enemies.

One way to shift cash your way is to ask for all or a portion of payment up front.

Asking for at least a deposit in advance is a great way to jump-start cash flow.

If you establish the policy fairly and properly, it should not alienate good customers.

Accepting credit card payments also can help. You pay a fee for this service, but it can be a fast way to collect cash.

You may need to manage "receivables" more closely. Create a detailed "aging" schedule of what you are owed and for how long. Place phone calls to overdue accounts, focusing first on the larger ones due. Offering a discount can bring some quick cash in the door, but play this card only after you have called the customer to ask for full payment.

Finally, do not overlook the power of an operating budget. Note specific due dates for payables as well as receivables and regularly use them as a "snapshot" of your cash flow status.

Stephen L. Rosenstein is co-chairman of the Greater Baltimore SCORE Chapter No. 3. Call 410-962-2233 to speak to a SCORE counselor or visit To send a question to SCORE, e-mail

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