Jul

2010

Last Thursday’s Wall Street Journal featured yet another article on the sad state of small business bank lending.

(“Real Collateral Damage – with Assets Harder to Value, More Small Businesses Need Cash to Get a Loan” 7/22/2010 pg B1)

After I turned to page 6 to continue the article, I kept flipping back to the first page to make sure I wasn’t reading the Onion. Banks are apparently – and with a straight face – offering to lend you your own money and charge you interest for the privelege. Their wording of the offer is slighly different, but the outcome the same.

In these perilous time, I figured it would be a good idea to revisit some proven cash flow management techniques. If you’re a small business owner, you have to steel yourself against the probability that credit will NOT be forthcoming, and that the government is not going to bail you out.

Here are some of the latest tips gleaned from our recent Webinar on the SurvivalWare Cash Planner.

Tip #1: Roll up your sleeves and do some detailed cash planning when (and only when):

You are just starting out
You’re in trouble (less than 15 days cash)
You’re in transition (new hires or layoffs, new product release, etc.
You’re a practitioner of Just-in-Time Capital and you want to stick it to the banks by not borrowing from them

Tip #2: Find out which vendors will accept credit card payment of invoices.

It is amazing who will accept credit card payments now – lawyers, accountants, marketing consultants and other service providers in addition to the usual product vendors and retailers. If you can, run all our your non-payroll expenses through your American Express, and earn points at the same time. That extra 30 days can be huge. But of course, this works only if you can pay AMEX on time each month.

Tip #3: Find out what it means to be “on-time” with American Express.

Sally from Salt Lake City reports that she called them recently about 10 days ahead of the due date on the bill, and asked if she could split the payment in half. She was told no, they couldn’t do that, but that she could take advantage of the 15 day grace period. This turned out to be one of many key “baby steps” she took to get through a real nasty cash crunch.

Tip #4: Change the lag in work to payday.

Donnie in Des Moines changed payday to the 8th and 22nd from the 1st and the 15th of each month. The key to retaining employees is to make the announcement in advance – not the day of payday. Since over half of his costs are people costs, this had a significant impact on his “Days of Cash” – increasing it by 4.

Tip #5: Be persistent.

Duh. Hank in Houston tells me that if Plan A doesn’t work, he goes to Plan B, and if that doesn’t work, to Plan C. He points out there are 26 letters in the alphabet.

What are your most effective Cash Flow Management practices? We’d love to hear about them.

More Info

White paper on Just In Time Capital:

http://www.survivalware.com/articles/just_in_time_capital.php

10 Tips to Survive a Cash Flow Crisis:

http://www.survivalware.com/articles/10tips.php

SurvivalWare Cash Planner – 45 minute webinar from 7/14/2010:

www.survivalware.com/download/2010-07-14_Webinar_SurvivalWare_Cash_Planner.wmv