Up your cash flow game

Smart business people make money by looking forward — at the next few years, not at next week’s payroll. Cash is king. And if you’ve scrambled to pay vendors or cut employee paychecks, you know that when the cash runs dry, you’re out of business.

Your job as an employer runs deeper than just making payroll. “We run businesses,” says Gene Marks, columnist for The New York Times, The Huffington Post, Fox News and others. “We have responsibilities. People rely on us. Our employees. Our customers. Our suppliers. Our partners. Our families.”

Marks, an author of business management books for small- and mid-sized firms, has some ideas for owners and managers working in established green industry businesses — ways to help you manage cash and grow, to reduce expenses and build profit. “The biggest thing I’ve learned about cash flow is about thinking ahead, and planning way ahead,” Marks says.

A favorite example of his is the Gardiner’s Furniture $600,000 “loss” on its Super Bowl bet on the Baltimore Ravens. Anyone who bought furniture from the store the days prior to the big game in 2012 would get their furniture for free if the Ravens scored on a kickoff return to begin the game or second half.

History put the odds in Gardiner’s favor. In the 46 previous Super Bowls, just eight kicks had been run all the way back. But not this year. The Raven’s Jacoby Jones opened the second half with a long-shot dash and returned a kick 108 yards for a touchdown.

Gardiner’s had to pay up — and according to a Fox News report, 445 customers made good on the store’s offer. (One mom of three scored $4,000 of free children’s furniture.)

“You’d think this guy must have had a heart attack,” Marks says of the win, and loss for Gardiner’s. “But the first person the owner called was his insurance guy because he spent $12,000 on a policy to make sure if, God forbid and lightning strikes, and someone runs this ball (back), his costs would be covered.”

The $12,000 policy was an incredible marketing investment for Gardiner’s, which made national news for the stunt and garnered attention from the business community because of its cash-flow smarts. “Cash flow is all about thinking ahead,” Marks emphasizes. “It’s paying attention to the details.”

Here, Marks provides five strategies for upping your cash flow game.
 

1. Print & mark up the general ledger.

“As boring as it may sound,” Marks says, print the general ledger monthly and get out your pen. Leaf through those 20 or 30 pages of transactions and take note of expenses that seem off. Ask yourself some questions. “Why did we pay this guy three times?” “Who is this guy?” “Why did we write that check?”

“To keep track of your company’s cash flow, you have to look at the details,” Marks says. “Don’t do it every day. Do it once a month.”
 

2. Create a flash report.

Every single day, print out a one-page report containing critical financial information that is necessary to track. “I do not mean an income statement,” Marks clarifies. “You can wait for an income statement — but you need to have this flash report.”

Good news: This report is easy to put together. Take your key metrics — cash (today), receivables, accounts payable, callbacks/retreats, backlog and revenues. Now, the key to the report is to benchmark these daily numbers — compare them to your cash on the same date last year, for example. Study year-to-date comparisons on a daily basis.

Start running flash reports tomorrow, Marks says. “See what happens when you are more aware.”
 

3. Generate a rolling forecast.

What do the next three months look like at your business from an income and expenses perspective? If you’re not quite sure, that’s all the more reason to begin generating a rolling forecast. Marks suggests printing a monthly income statement — “always make it year-to-date,” he says of benchmarking. Compare this income statement to your year-to-date flash report. How are you doing?

Next, create a spreadsheet with three columns for the next three months. So, if “now” is July, create a column each for August, September and October. Next, study your backlog to get an idea of projected revenues. Fill in the columns.

Consider what expenses are coming down the pike (fixed — payroll, overhead, along with estimated taxes, inventory and supplies). Plug in projected income and expenses to paint a future cash flow picture.

“Here, you’re doing what Gardiner’s Furniture did — they looked ahead, and that’s what smart businesses do,” Marks says.
 

4. Invite an outsider "in."

External financial services are not cheap, Marks admits. (He’s a CPA …he knows.) But there are various levels of financial insight that CPAs can provide, and most small- to mid-size businesses will gain tremendous insight from a fairly basic “compilation” service. In this scenario, the business owner hands over his/her general ledger to the CPA, who transfers this information into a financial statement with footnotes to explain the numbers.

The value of gaining external financial insight is in the findings that surface when a professional who is not mired in the daily details of your business drills down into your ledger. “This can reveal things that are costing you money,” Marks says. And, part of boosting cash flow is identifying money vacuums.
 

5. Implement smart technology.

With an excess of 400 million mobile users in the United States, businesses that are equipped to invoice and collect payment via mobile devices position themselves to get paid faster. That’s a fast “liquid” shot in a company’s bank account. Intuit’s GoPayment and Square are two applications to consider, along with PayPal’s mobile payment service, as well as the mobile solutions offered by industry software providers.

How about getting that contract signed in a hurry without paper? Document signing applications that facilitate “e-signatures” add ease to work orders and estimates. “These apps decrease the amount of time between closing a sale and when you get the cash in — it stops paperwork, and it increases cash flow,” Marks says.

And, perhaps the most valuable tech tool for businesses, Marks says, is a customer relationship management (CRM) program.

These database systems track everyone who has touched your business: suppliers, partners, clients, prospects, etc.

“Whoever picks up the phone at your business will know the customer [from accessing the database],” Marks says. This increases cash flow because of the information share that allows everyone in the business to stay current on the status of various accounts.

“Nothing falls through the cracks with a good CRM system.”

Kristen is a freelance writer based in Cleveland, Ohio, and a frequent contributor to sister publication PCT magazine. khampshire@gie.net