77 Tips & Techniques To Improve Your Cash Flow (2318/Level 2)

77 Tips & Techniques To Improve Your Cash Flow Control (2318/Level 2)

Hi, this is Diane Gilson, and welcome to today’s session for, ‘77 Cash Flow Enhancement Techniques’ that we’ve put together for you to use internally.

So, in this session, we’re going to be talking about a variety of cash flow ideas and how to keep that cash moving – coming and going through your business – in the best possible way.

So what I’m going to do is move over [here], and we’re going to take a look at our hand-outs. OK, we’ve got 77 cash flow tips and techniques.  We’re just not going to be able to get through each one of these but I would like to highlight some particular things. I put in the front of this, “Business and personal rule number 1, don’t run out of cash.”  I read this a long time ago.  “Business and personal rule number 10, don’t run out of cash.  And rules number 2 – 9 aren’t that important.” Now I wish I knew where I had seen that, and who to give credit to for that, but it’s really, really true.

So here are some major things that we can talk about:

• Pricing of products and services.  You want to know your costs exactly so that you can charge properly. So that’s part of what you’re working on now, is to get your system set up so you know exactly what your costs are so that things are being priced and charged out properly.  So that’s one of the major reasons that people have cash flow problems, is they’re not charging the right amount for the services that they’re providing, or the goods that they’re providing.
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• Also, whoever`s doing your estimating needs to understand the really big difference between mark-up and gross profit, so I’ve given you a link here to look at some conversion charts, our gross profit and margin, and mark-up tables. These are going to be very helpful and so I really want you to have this. So basically what we do is we say “Well if the markup is this, then the gross profit is going to be that.”  Or “If you want a gross profit of this amount, you need to mark up that amount.
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• So, you also want to price your products and services to cover any slippage and contingencies.  This is part of the estimating process.  I don’t know that we’ve talked about that, but make sure that you build in something extra in your pricing for that [slippage and contingencies].
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• If you’re a business owner you have to be able to feel good about what you’re charging.  So knowing what your costs are can help you feel pretty confident that you’re charging the right amount, that you’re covering your costs and making the right profit.  You have to be able to confidently ask for and require payment. So a good way to do that is to be confident and address your money matters first.  “Let’s talk about logistics first…”.  Get that out of the way.  I like to think of that as – in the Jerry McGuire movie – as ‘Show me the money.‘ You don’t want to be doing work where you’re not going to get paid.
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• It’s good to know upfront – can your customer afford you?  And there are some options in here.  If it appears that they can’t.  Maybe you can perform work in stages, or you can scale back on the scope of the work. But, if you’re getting a bad feeling, you’ve got to “Know when to walk away, and know when to run” as ‘The Gambler’s Song’ says. You’re not under any kind of obligation to do work for people you’re not going to get fair compensation from.
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• You can speed up your cash flow via customer invoicing and collections.   You want to collect as soon as possible – when people are still feeling good about what they’re purchasing from you. It’s amazing. I don’t know if you’ve experienced this in your personal life but, boy, when you decide you want that ten-speed (or what is it, twenty-eight speed?) bike that people have now, whatever.  When you want it, you’re excited about getting it.  You’re excited about,… well nobody’s excited about paying for it… but when you’re just enthused about what’s going on, and you put that bike on a credit card, or on a bill, and now you’ve had the bike for a couple of months and that bill keeps coming in the door, you know you just get less enthused about paying for it. So the quicker you can collect, the better things go.  It’s just been proven year after year, it’s a major knowledge in the banking industry and the lending industry, the longer and older a receivable is, the less likely you are to collect on it; so try to get that money as early as you can in the process.
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• How you establish terms and credit limits.  You check customer credit before you extend credit.  If the project is financed you need to know exactly what you need to submit in order to get the financing on a timely basis.  How long is it going to take? How do we handle any issues to be resolved? Be sure that you’re open and very up-front about what your terms are so everybody knows what’s going on.  Get all that stuff on your contracts, invoices, and statements.
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• Track your time. I mean there’s just a whole set of things that I’ve included here that you can use to keep that cash flow moving, now something that a lot of people do and have very good success with is…