Wyoming Business Tips for Oct. 10

A weekly look at issues facing Wyoming business owners and entrepreneurs from the Wyoming Small Business Development Center (SBDC) Network, a collection of business assistance programs at the University of Wyoming.

By Steen Stovall, regional director (Converse, Natrona, Niobrara and Platte counties), Wyoming SBDC Network

Inadequate cash flow management can cripple a small business and is one of the major causes of small business or startup business failure. Here are seven tips to avoid cash flow problems at your small business.

Plan Appropriately and Plan Often

The real key to avoiding a cash flow crisis is to do the appropriate planning and do it consistently. To accomplish this, a business owner must review his or her profit and loss statements as well as any other nonoperational items or circumstances that specifically affect cash flow.

Open Your Monthly Bank Statements

Compare cash balances at the beginning and end of the month. If the end-of-the-month cash balance is higher, the business is cash flow positive. If the end-of-the-month balance is lower than at the beginning of the month, the business is cash flow negative.

Learn to Read Cash Flow Statements

Don’t ignore your bookkeeping. By definition, cash flow is typically your monthly profit, plus the change in accounts payable, the change in accounts receivable and the change in inventory. The higher this number is monthly, the healthier your business will be.

Collect Accounts Receivables Faster

The sooner a customer pays, the higher the cash flow amount for your business. Determine your current days sales outstanding and evaluate if that current time frame is working for your business. Don’t extend credit to customers who haven’t proven they can pay in a timely manner. Better yet, get your customers to pay with a credit card or prepay for your services.

Get Longer Terms From Vendors

Extended credit from your vendors will increase your available cash. Always pay within the agreed period of time. However, if you have 30-day terms, try to get 45 days by building up a reliable track record of payment.

Sell Inventory Faster and Keep Inventory Levels Low

Buying inventory that sits for months on your shelf waiting for customer orders can take a lot of cash out of the business. Track your inventory carefully. Know what sells quickly and what doesn’t. Know how long your customers will wait for a product and still be satisfied. This will determine how to set efficient inventory and quantity reorder points.

Avoid Filing Delays in Deposits of Payroll or Other Taxes

Filing delays in deposits of payroll and other taxes should be avoided at all costs. The penalties can be severe. Paying taxes must come first.

Using these tips will not only help you manage your cash flow, but they also will help you take another big step toward business success.

If you’d like to learn more and start managing your cash flow more efficiently, contact your Wyoming SBDC Network adviser for no-cost, confidential advising and assistance. For more information, go to www.wyomingsbdc.org.  

The Wyoming SBDC Network offers no-cost advising and technical assistance to help Wyoming entrepreneurs think about, launch, grow, reinvent or exit their business. In 2021 alone, the Wyoming SBDC Network helped Wyoming entrepreneurs start 80 new businesses; support 4,077 jobs; and bring a capital impact of $9.2 million to the state. The Wyoming SBDC Network is hosted by UW with state funds from the Wyoming Business Council and funded, in part, through a cooperative agreement with the U.S. Small Business Administration.

To ask a question, call 1-800-348-5194, email wsbdc@uwyo.edu, or write Dept. 3922, 1000 E. University Ave., Laramie, WY 82071-3922.