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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 through your business in the best possible way.
So what I’m going to do is move over here and we are 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 is part of what you are 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 thats one of the major reasons that people have cash flow problems. They
are not charging the right amount for the services that they are providing, or the goods
that they’re providing.
Also, whoever is doing your estimating needs to understand the really big difference between
mark-up and gross profit, so I have 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.
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 slippage and contingencies.
If you are a business owner you have to be able to feel good about what you are charging.
So knowing what your costs are can help you feel pretty confident that you are charging
the right amount, that you are 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 do nt want to be doing work where you are not going to get paid.
It is good to know up front. Can your customer afford you? And there are some options in
here if it appears that they cannot. 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 have got
to Know when to walk away, and know when to run as The Gamblers Song says. You are not
under any kind of obligation to do work for people you are not going to get a fair compensation
from.
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 are purchasing
from you. It is amazing. I do not know if you have experienced this in your personal
life but 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 is excited about paying for it. But when you are just
enthused about what is going on, and you put that bike on a credit card, or on a bill,
and now you have 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 has 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.
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 are open and very up-front about what your
terms are so everybody knows what is going on. Get all that stuff on your contracts,
invoices and statements.
Track your time. I mean there’s just a whole set of things that I have 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