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Historically, many profitable businesses have failed as a result of cash flow problems – cash in and out of their companies.

That’s mostly because they’ve had irregular revenue and have failed to balance it with their expenses such as rent, salaries and technology.

So cash flow statements, balance sheets and income statements are important. For insights on your profitability, the balance sheet gives you a snapshot of your assets, liabilities and equity.

Of course, your balance sheet shows your cash balance while your income statement shows your expenses, revenue, profit and losses.

But trouble rears its ugly head when entrepreneurs fail to compare their income statements with their cash-flow statements to see the difference between cash flow and profit.

Income statements are based on accrual accounting, which immediately show revenue and expenses in each accounting period.

Cash-flow statements are based on cash-basis accounting, which shows when cash is exchanged.

There’s a difference between making money and managing cash flow. Cash flow becomes an issue when income is irregular while expenses need to be paid.

Entrepreneurs need to solve the ebbs and flows of income.

To manage your cash flow, here are a dozen basic tips:

1. Regularly monitor your cash flow

Use good accounting software.

2. Cut expenses

Renegotiate leases and loans, and even refinance your business loan.

Consider how to cut back on expenses such as payroll, rent, utilities as well as unneeded subscriptions and services.

Insurance is very important for protecting your assets and cash, so see the Biz Coach business insurance tips. But non-renew any insurance that’s no longer applicable.

3. Generate quick cash from assets

If you have obsolete equipment or inventory, consider selling them for quick cash.

4. See your banker for a line of credit

A line of credit is good to insure stability when you’re stuck temporarily between revenue and expenses. When the revenue arrives each month, pay off the line of credit.

5. Instead of buying equipment or vehicles, consider the leasing option

You’ll avoid tying up your cash while taking advantage of the newest innovations. You’ll also be able to deduct them as expenses.

6. Invoice properly and promptly

For prompt payment, know who and where specifically pays invoices. Depending on your type of business, hand-deliver or email your invoices.

As a management consultant, I’ve always presented my invoices personally. In this way, I got a report card on how my clients felt and I was paid on-the-spot.

Also, some entrepreneurs use mobile payment solutions – smartphones or tablets to get paid via credit or debit cards.

If your accounts receivable are past due, do this.

7. Offer incentives for fast payment

For some customers or clients, you can offer a percentage discount for fast payment.

For clients who owed me thousands of dollars each month for my advertising services on TV and radio, I sometimes offered a 1-percent discount for immediate payment.

But make sure the incentives won’t devastate your bottom line.

8. If you’re a professional-service firm, work off a retainer

This is particularly helpful for consultants and other professionals.

9. For long-term contracts, require deposits or partial payments

Charge a deposit upfront – from 10 percent to 50 percent – to cover your basic costs to deliver on a project. In this way, you’ll get enough cash to pay your employees and finance your materials.

10. Delay payments

Try to negotiate incentives or early payment terms. But if you can’t and without disrupting your relationships or risking late fees, determine how long you can delay payments.

11. Obtain a business credit card

In addition to getting a break for your cash flow, you can obtain other benefits. Many card companies offer reward points useful for business purchases and travel.

Such cards also help you track expenses by categorizing them.

While business credit cards offer several benefits, take precautions in issuing credit cards to employees.

12. Get the right help

A good accountant will help you manage your cash flow and will be a super sounding board for related business challenges.

But make certain you get red carpet service from your accountant.

Scroll down to the Coach’s Corner for more detailed strategies for positive cash flow.

Meantime, from the article, ” Working Capital: What Is It and Why Do You Need It?“, here’s here’s a terrific infographic:

From the Coach’s Corner, here are related strategies:

You Can Creatively Manage Your Cash Flow 7 Ways – If you’re taking the pulse of your business, of course, the first thing to consider is your cash flow. If your cash flow is poor, you feel poor because you can’t pay the bills nor can you use money for what you’d like to do.

For the Best Cash Flow, Manage Your Inventory Costs with 8 Tips – With proper inventory management, you can lower your expenses and increase your cash flow. For many businesses, it means taking a look at your inventory costs.

Small Business Options for Year-End Cash Flow, Tax Benefits – The fourth quarter is the time for small business owners to reflect on options for year-end cash flow and tax benefits. In general, here are items to discuss with your accountant and tax advisor.

Angel Investor: Tips for Increasing Cash Flow, Profits – A successful angel investor shares his tips for good cash flow and other profit issues.

11 Tips to Negotiate Your Commercial Real Estate Lease – Depending on your locale, commercial real estate is either readily available or hard to find. Either way, it requires due diligence and skills to negotiate the best commercial real-estate lease.

Revenue is vanity, profit is sanity, but cash is king.


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.