Wyoming Business Tips for Feb. 8

A weekly look at Wyoming business questions from the Wyoming Small Business Development Center (WSBDC), part of WyomingEntrepreneur.Biz, a collection of business assistance programs at the University of Wyoming.

By Bruce Morse, WSBDC Region II director

“What can I do to improve my cash flow?” Phil, Bridger Valley

Cash flow issues seem to be a concern for many small business owners, and this time of year can be particularly difficult.

First, let’s define cash flow. For the purposes of this dialogue, I’ll call it the “flow of money into and out of the business.” This includes revenue generated from sales, collecting that revenue, paying your bills for both the cost of goods sold and fixed expenses, and repeating the process.

Before too long, business owners’ accountants may tell them, “congratulations, you made a profit last year” when they complete their tax returns. Yet, the business owners look at their checkbook balances, and they are nearly empty. How does that happen?

There are some differences between cash flow and net income. For instance, a business may have money tied up in accounts receivable that shows up in revenue but not cash when the owner has yet to collect it. Other areas could be excess or stale inventory, principal payments that don’t reflect on the income statement but have to be paid with cash, or owner withdrawals that have not been accounted for.

Some of these ideas can be implemented:

-- Speed up billing. Send invoices weekly or twice a month instead of at the end of the month. Better yet, hand them to customers at the time of service.

-- Beef up your collection process and consider changing your credit policy.

-- Negotiate longer terms with suppliers/vendors.

-- Be careful with taking discounts if you don’t have the cash.

-- Watch your inventory levels carefully, and move out stale or excess items.

-- Take credit cards in lieu of offering a customer an account whenever possible.

-- Fire some customers. If they aren’t profitable, you need to get them to the point where they are or weed them out.

-- Review your aging of accounts weekly and share past-due information with sales staff.

-- Anticipate cash needs (budget) and establish a line of credit to cover shortfalls.

If you need help analyzing your personal situation and developing a strategy for your business, contact the Wyoming Entrepreneur for pre-paid, one-on-one guidance.

A blog version of this article and an opportunity to post comments are available at http://wyen.biz/blog1/.

The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, email wsbdc@uwyo.edu or write 1000 E. University Ave., Dept. 3922, Laramie, WY, 82071-3922.