home
***
CD-ROM
|
disk
|
FTP
|
other
***
search
/
Shareware 1 2 the Maxx
/
sw_1.zip
/
sw_1
/
BUSI
/
SBA62.ZIP
/
FSBA.EXE
/
F225.SBE
< prev
next >
Wrap
Text File
|
1992-04-30
|
5KB
|
104 lines
@096 CHAP 9
┌───────────────────────────────────────┐
│ MAXIMIZING YOUR CASH FLOW │
└───────────────────────────────────────┘
"MONEY is not the root of all evil. The LACK of money
is the root of all evil." -- The Reverend Ike
(Or, as Oscar Wilde put it, "Work is the curse of the
drinking classes.")
Money is still the ultimate labor-saving device, and cash flow is the
lifeblood of any business organization. Yet all too many small
business operators are so concerned with other matters that they fail
to pay proper attention to managing their cash resources properly.
Good cash management can make a significant contribution to the compet-
itiveness and profitability of your business. Poor cash management is
one of the main causes of business failures, particularly among smaller
firms. A cash shortage due to poor planning can set off a chain of
disastrous consequences, even in a profitable business.
Cash flow management has two aspects--projecting future cash flow and
controlling and maximizing the cash available from operations at all
times.
(a) PROJECTING CASH FLOW. Projecting your business's near-term and
long-term cash needs is a very crucial function. The purpose of making
accurate cash flow projections frequently is to bring to your attention
any point in the future where you may incur a cash shortage or deficit,
so that you can take steps in advance to prevent that occurrence, such
as raising new capital, borrowing money, cutting prices to liquidate
some inventory, cutting back on a planned expansion, etc. You may want
to consult your accountant for assistance in setting up worksheets or
computer spreadsheets to do regular projections. Your CPA may also
have (or be able to recommend) computer programs for doing cash flow
projections.
(b) MAXIMIZING YOUR BUSINESS'S CASH FLOW. The following are a number
of effective methods of maximizing cash flows for your business:
. Bill your customers promptly. The later they receive a bill,
the later you will collect for a particular sale, in general;
. If you know that certain large customers must receive bills by
certain days of the month in order for you to get paid that
month, try to bill them before those deadlines if possible;
. Deposit your cash receipts in the bank daily, if possible;
. Keep close tabs on credit customers. Send them past due notices
as soon as payments become overdue;
. If you can do so without hurting business, add late charges to
overdue accounts;
. Never pay bills until just before they become due, unless there
is a worthwhile discount for quick payment;
. Try to keep inventories as lean as possible. Even if you oc-
casionally lose a small sale because you are temporarily out of
an item, you should be far ahead of the game by substantially re-
ducing the amount of cash you have tied up in inventory;
. Look for items in your inventory that are moving slowly or not at
all. Consider slashing the price on those articles to convert
them to cash and also to reduce the cost of storing them or tak-
ing up valuable shelf space;
. Consider leasing equipment items instead of buying;
. Be sure that you are not paying more on your estimated income
taxes than you have to. You may qualify under certain exceptions
that will allow you to delay paying much of your tax for the year
until the tax return is due, without incurring interest or late
payment penalties. If you realize that you have already overpaid
corporate estimated income tax for the year, there is a procedure
for obtaining a refund, by filing IRS Form 4466, prior to the
time when you can file a return;
. If your business has "net operating loss" for income tax purposes
that can be carried back to prior years or a carryback of tax
credits, a procedure exists for filing a claim for a quick refund
of the prior years' taxes. Individuals file a Form 1045 while a
"quickie" corporate carryback claim is filed on Form 1139. File
either as early as you can, since the IRS no longer pays interest
on these refunds;
. Instead of keeping all your business cash in a local bank
account, consider putting a significant portion of your cash in
an out-of-town money market-type fund that pays interest and
allows you to write checks against the account. Since you will
continue to earn interest on funds on deposit until the checks
clear, consider using a fund in a distant part of the country,
since (notwithstanding the electronic revolution) it will usually
take longer for your checks to clear when you make payments to
local firms if your money market fund is located 3000 miles away.
@CODE: LS
. In @STATE, the best way to maximize your cash flow is to
join the Party.
@CODE:OF