Four Sources of Cash Flow to Fund Your Growth, Without Borrowing a Dime

Mackey McNeill, CPA, PFS, IAR, President & CEO
Mackey Advisors
April 2017

For anything to grow it needs fuel. In business, that fuel is cash.

The economic climate for most businesses is positive right now, but that doesn’t mean you aren’t having cash flow challenges. In fact, if you are growing, and especially if you are growing quickly, your main concern day to day may very well be having enough cash to pay your bills and stay in business.

Here are some quick ideas that can create new fuel, quickly, without negotiating an increase in line of credit with your banker.

  • Consider your invoicing terms.
    • Consider asking for a deposit against your work. Especially if your work is custom for each client. They may very well be expecting it and surprised you haven’t asked.
    • Step back and look at your customer value.  Do you provide exceptional value?  Does that give you a reason to ask customers for terms shorter than the industry?
    • Meet with your largest customers and get their advice.  They value their relationship with you and are usually happy to help.
    • Change terms with new customers. Don’t want to upset the apple cart?  Set up new, shorter terms for new clients.
  • Pay less frequently. In most businesses, you are paying your labor long before you are generating sales and cash to cover that cost.  If you are paying weekly, can you move your payroll to bi-weekly or semi-monthly?  If your payroll is $25,000 a week, that frees up $25,000 or more immediately. Even more in that the payroll taxes are paid after pay day, so you get some float there as well. You will need to manage this with your team, getting folks personally prepared, so you don’t lose great people along the way.  Can’t move your rank and file off weekly pay? 
  • Deep dive in inventory.  It is easy to convince yourself you need a lot more inventory than you really do.
    • Start with the simple things, like what is your purchasing practice?  Is your purchasing officer looking just for low price, or are they considering cash flow impact?
    • Ask for longer terms with your key vendors.
    •  Fire sale inventory or find a strategic buyer for items you know are never going to sell.  Getting some money in is better than none and its less to manage.
    • Incentivize your team with an inventory target.  I had a client that generated new cash of $350,000 in 8 months with this one idea!  It is certainly worth a small bonus to pocket $350,000 in new cash flow.
  • Review your accounts payable practices.
    • Are you paying by the due date or when the invoice comes in?  You may be surprised by what you find.
    • Consider paying invoices by credit card with cash back.  If your vendors accept credit cards, this gives you an automatic 30 days, plus, depending on the billing cycle.  Sweeten the deal by finding a card that pays cash back.

Lastly, ask your team.  You might be surprised at how many good ideas they already have!

To your prosperity,
Mackey