Cash Flow: 19 Strategies to Improve Your Income

If you own a business and want to stay on “the best path to prosperity,” watch your cash flow. If you watch business news channels, including Larry Kudlow’s show, ‘The Kudlow Report.’ You will hear his constant preaching. He says, “Free-market capitalism is the best path to prosperity.”

19 strategies to improve your cash flow

Here are 19 strategies to improve your cash flow or cash management, thanks to Floyd Talbot of AFB Business Solutions.

1. Put safeguards in place over checks and any other negotiable instruments to prevent theft or fraud from being a temptation.
2. Put written procedures in place so employees cannot say they did not understand what you require them to do.
3. Have a trusted third party test these written procedures, such as your CPA or Enrolled Agent.
4. Understand some simple financial ratios to quickly and easily assess the business’s performance. These ratios are:  Total assets turnover, Current ratio, and Quick ratio. If you’re not quite sure how to calculate these ratios, consider having someone who does, such as your CPA, create a one-page cheat sheet that you can use every month. While ‘Ignorance is bliss,’ the better metaphor is ‘knowledge is power.’
5. Find benchmarks for your industry and company size, and analyze your company’s performance to identify areas for improvement.
6. Establish a cash flow budget to compare to actual expenditures. The goal is to track actual spending against the budget to ensure that any deviations are understood, accepted, corrected, or addressed accordingly.
7. Post all cash transactions within your accounting system. This is especially true if you plan to sell your business, as every dollar you do not report may result in a loss of two to four dollars in your final purchase price. See the quality of the earnings report.
8. Put strong controls around petty cash. Thieves look for weaknesses. If they see a simple way to exploit a situation, they will look for other ways.
9. Require employees to take a vacation. Many instances of fraud are only discovered when the person who has been performing the same job for many years finally takes a vacation. The replacement then receives a call from a bank or vendor requesting approval of a rogue process that no one knew was happening.
10. Implement controls around credit cards, such as maintaining a ledger of who has them and designating a different person to reconcile the monthly statement with the user. The same applies to gas or service station cards. See also: Credit Card Scams to Avoid.
11. Implement stronger controls around debit cards and authorization. Once a purchase has been approved, the money is gone.
12. Minimize inter-account transfers except for sweep accounts and cash level requirements. The processing and bookkeeping costs can add up and are a hidden cost to recognize.
13. Pay attention to wire and EFT transfers and record them daily. Perhaps it’s time to review these costs to see if another bank offers a lower rate.
14. Run a cash flow statement regularly or have one produced and given to you. Discuss it with a third party to see if they have suggestions you hadn’t considered or didn’t have the time to follow up on previously.
15. Review your internal controls, which include, wherever possible, assigning only one person to each task.  One person, one task, provides accountability, and therefore, is one of the most cost-effective and safe ways to manage and respond to lost money.
16. Now that you have separated each task, segregate duties by assigning different people to review the work of others. For example, when new goods arrive, have someone receive the order, verify the contents, and then have a second person put them away only after signing off that the number of goods was correct. Due to the volume of cash and goods they receive, Walmart has some of the best practices in place.
17. Where there are expensive or sensitive goods, restrict access.
18. Conduct random and ad hoc audits to verify and check.
19. Implement safeguards and written procedures for handling cash around cash registers on a daily basis. For example, the right policy is to have the same person always handle their cash drawer, from checking the cash at the start of the day to removing and balancing their cash drawer after their shift and presenting a report with the money to a third party.

Do not attempt to implement all of the above in a week. That way, you can watch your cash flow soar. Finding your business’s worth can be challenging. With the help of a professional, you can not only determine your business’s value but also ensure its optimal growth and development. You can also ensure its optimal growth and development. You can also learn how to increase it.

If you are considering valuing and selling your company within six to twelve months, give Andrew Rogerson, a certified business broker based in Sacramento, California, a Call Toll-Free at (844) 414-9700  or email me at support@rogersonbusinessservices.com, who services the whole state of California.