Strategies for Managing Cash

 Gift shops. Floorings. Manufacturers. Furniture Retailers. Telecommunications companies. Consulting Firms. Attorneys - What do all these companies have in common? Cash. Or should I say a lack thereof. 

In the last two weeks I have spoken with business owners in each of these industries who are going out of business, taking dramatic action to raise cash through liquidations and refinances, or are putting off retirement and other plans because of a cash shortfall.

So how can you prevent this from happening to you?

The answer is, through knowledge and planning.


Create a cash flow projection by week or month (depending on how tenuous your situation is) for at least the next 3 months. Start by writing down how much cash you have right now. Then write down how much you expect to receive this week (or month) in collections, cash sales, outside investments, loans, etc. Now you know how much you can spend this week. So write down where you will be spending cash this week – Payroll, Rent, Insurance, Vendor Payments, Taxes, etc. Now subtract your total cash payments from your total cash available. You will see how much you’ll be ending the week with and you can start projecting for next week. Pretty easy. If you’d like a spreadsheet to make it even easier, contact me today.  Update your projection every week, or every day if necessary, and make sure you know how you will always have cash. So what if the cash flow projection turns negative? Read on.


If you might need money in the future – and that would be all of us – try to get the loan approved before you need it. Lines of credit can be great, if you use them for short-term needs. So shop around the local banks (they tend to be much easier to deal with) and get a line of credit today.


If investors and loans won’t cover your projected shortfalls, start cutting expenses today. Don’t wait and hope. Cut non-revenue generating expenses first, measure the ROI on every expense and cut the losers, reduce payroll hours, and re-negotiate or re-bid everything.


Measure your average days to pay vendors and your average days to be paid by customers. If you don’t know how to measure these, ask me.   You need to be paying your vendors as slowly as you can get away with and collecting from customers as rapidly as you can. The difference is called float and, the bigger it is, the healthier your business.


As a small business owner, your personal credit matters - and it matters a lot. So make sure your personal credit score is high and if it isn’t, spend some time learning how to improve it.



If your projections still look bleak and you have done everything you can think of, don’t hide. Get help sooner rather than later. Too many business owners see the problem coming months in advance but they don’t tell anyone; they don’t ask for help, and they just kind of "freeze up." When their creditors and bankers discover the problem - (and they always do), your credibility becomes very poor. So instead of waiting - put together all your numbers, chart a plan, and sit down with those creditors. Enlist their help. They really don’t want to own your distressed assets and if you show them a plan, they will be much more open to negotiating some kind of terms you and your business can live with.

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