Cash Flow Management Making more money will not solve your problems if cash flow management is your problem,” said Robert Kiyosaki, author of Rich Dad Poor Dad. As your company grows and cash outflows exceed cash inflows, implementing cash management strategies starts with asking why you have a cash deficit. There might be several reasons. First, if business is expanding, you might be hiring more employees, buying more inventory, or leasing more space. Another reason for your cash shortage is that you are extending credit to your buyers. You might be paying your suppliers in advance while your buyers pay within 30- or 60-days. Once you understand the cause, you can develop a cash management strategy like shortening the cash conversion period by requesting terms from your suppliers or shortening the terms your buyers are paying you. Also, you may consider very cautious credit policies allowing only your best customers to pay on terms. You may need cash injections or financing like a working capital line that will advance a percentage of your invoices. For example, the SBA’s Export Working Capital Program allows exporters the opportunity to receive up to 80% advance rates on their foreign accounts receivable. As a business owner, you know information is power, so regularly perform a cash flow analysis to forecast cash flow. The constant analysis gives you the ability to address problems before they happen. Richard Branson, the British billionaire and entrepreneur, said, “Never take your eyes off the cash flow because it’s the lifeblood of business.” To assist you or your customers with cash management strategies, reach out to your local resources for no-cost counseling and low-cost training from the Colorado Small Business Development Center, the Service Corp of Retired Executives, the Veteran’s Business Outreach Center, or Mi Casa Resource Center. By Patty Brewer, U.S. Small Business Administration Patty Brewer is an Export Finance Manager with the SBA’s Office of International Trade. Her territory includes Colorado, Montana, Utah, and Wyoming. She can be reached at 720-556-4664 or patricia.brewer@sba.gov. As a business owner, you know information is power, so regularly perform a cash flow analysis to forecast cash flow. The constant analysis gives you the ability to address problems before they happen. www.coloradobankers.org 26
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