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Steps to Improving Your Company’s Cashflow

No one can control the ups and downs of the economy. As a business owner, chances are you’re already doing what you can to control your costs and boost your revenue. Yet there’s another area where you may be able to improve your financial performance: Streamlining your incoming and outgoing payments to improve your cash flow.

According to a 2010 Visa® small business cash management survey, 35 percent of respondents ranked cash flow as their top concern, followed by 29 percent who cited financial planning – far more than any other issue. Their concern is justified: Studies have shown that cash flow problems are the number-one enemy of small businesses. Taking steps to increase your available cash flow, therefore, could be well worth your time and effort.

See the big picture

Knowing what factors shape your cash flow is the first step toward building an efficient cash management structure. More than simply profit and loss, these include:

Accounts receivable, including payment terms and delays

Accounts payable, including payment schedules

Inventory and turnover

Capital expenditures

Borrowings and interest payments

Other “timing” issues that affect your actual cash on hand


A clear understanding of how each of these factors affects your cash flow will help you maintain control. To see the big picture, track all your income and expenses in one place. You can use dedicated accounting software or a simple spreadsheet. Once you’ve recorded all the details, use your best estimates to project 3 to 12 months into the future. This way, if you see trouble ahead, you’ll have time to do something about it.

Take control of your cash

The next step is to actively manage your cash flow. At its simplest, this means paying your accounts payables as close to the due date as possible without going past the due date while encouraging anyone who owes you money to pay it as quickly as possible. There are several financial tools that business owners can use to manage cash flow. The most obvious may be on the expense side: Reducing costs or spreading out payments over a longer time. However, be sure not to overlook opportunities to streamline the cash management process on the income side of the ledger as well. Your financial institution may also offer image enabled ATMs which allow you to receive images of deposited checks and an itemized listing of deposited bills on your receipt and have a record of your transaction.

Here are five more tips to help you manage and improve your cash flow:

Manage expenses. Take a hard look at every item in the expenses column and ask yourself, “Do I really need this?” Can you get by with less, negotiate a better price with your vendor or switch vendors to reduce costs? A few dollars each week or month can really add up.

List all bills. Make a list of all your ongoing bills and due dates, and pay them from this master list. This makes it easier to prevent late payments – and avoid paying too early as well.

Get good at collections. Consider billing daily or weekly instead of monthly to bring in income faster. Expect that some payments will be delayed, but don’t let them stay that way. The day a payment is overdue, call to ask about it.

Be pessimistic. Overestimate your expenses and underestimate your income, assuming a “worst-case scenario.” If you can sustain cash flow during challenges, you’ll be stronger when they improve.

Update your estimates. Even the best projections must be revisited and recalculated as time passes and circumstances change.  Update your estimates weekly and monthly to help track your cash flow and improve your next round of estimates.

Understand the fundamentals of cash flow and the best resources for managing it, and you’ll be on the right track to help your small business succeed.

Brady Brogni is the Business Banking manager for Wells Fargo in Flagstaff.

To reach him, call (928) 214-2516 or e-mail  HYPERLINK “mailto:brady.brogni@wellsfargo.com” brady.brogni@wellsfargo.com


© 2011 Wells Fargo Bank, N.A. All rights reserved.






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