Entrepreneurship

Tips for Managing Cash Flow

Tips for Managing Cash Flow

 

Michael Bernard

What’s the No. 1 reason small businesses fail? Cash flow, not lack of profits.
About 80% of small business failures happen because of poor cash-flow
management.

Mike Bernard, a consultant at the Florida SBDC at Indian River State College and a financial specialist, says he hears it all the time from his clients: “My business made a profit last year, but I don’t have any money to pay my bills.” Bernard notes that many of his clients have sizable sums of their operating cash tied up in Accounts Receivable or Inventory.

 

Remember, cash flow is not the same as Profit. Are you profitable but still struggling month to month in managing cash flow? You are not alone. Managing when money enters and exits a company is crucial to
business survival and growth.

Bernard, a Financial Analyst, stated, “A lot of businesses can sell their products, but they don’t understand their working capital cycle. A company, as we teach in our Profit Mastery seminars, can sell itself right out of business.” As businesses continue to grow, they must control their cash flow. For example, business owners get excited when they get a government contract. However, they need to understand the specific terms attached, like not being paid for 60 to 90 days. Meanwhile, you have to buy inventory and pay your fixed overhead
expenses. Can you sustain that?  If you cannot and do not get additional capital, sometimes it is better not to pursue the contract. What else can you do so your business does not become a statistic? The first and perhaps most important is to set aside time in your week to think about your strategy and try to understand your financial information. Small businesses are so much into day-to-day operations that they do not think enough about the cash flow cycle. You have to be constantly vigilant about looking
for ways to improve your cash flow. It is the lifeblood of your business.

“A business owner needs to regularly review and analyze the business’ financial statements and working capital cycle,” said Bernard. “Is this the best you can do, or are there additional strategies and tactics to generate and improve cash flow?” Bernard also notes, a thorough review of the business’ payables and receivables can uncover opportunities to shorten the operating cycle.

A Few More Ideas:
- Every industry has its own set of Metrics. The FSBDC at IRSC has a database of
these metrics to help you analyze how you are doing compared to your industry.

- Make it a daily routine to review the business’ actual daily cash balance.

- As you recognize potential cash flow problems, create strategies that correct the
problems.

- Accounts Receivable: Consider granting discounts for prompt payment. Such as 2 – 10 Net
30 (2% discount if paid in 10 days, or full payment in 30 days). Also, ensure that your terms are not too long and that your receivables are quality accounts to keep delinquencies down.

- Accounts Payable: Be careful on the payables side, also. Buying inventory that does not move becomes stale and then obsolete.  In addition, this time, you want terms on your side – as long as possible to pay and negotiate
volume discounts.

- Inventory: Compare inventory turn rate to the industry average (Metrics) to see how you compare. Remember, inventory that does not turn fast enough is money left on the shelf that could be in your pocket. Have a sale for slow-moving inventories or donate it to a non-profit for a tax write-off, and negotiate just-in-time contracts so that you can
keep as little inventory on hand as possible.

- To increase cash flow from sales growth, open newer, less costly distribution
channels, increase prices where you can and introduce new technology to help
reduce sales costs.

- Spend and collect with care.  Watch overhead costs, always negotiate on price.
Give credit very carefully but collect very aggressively.

This article is provided by the Florida SBDC at IRSC, the small business development Center within Indian River State College’s School of Business. The center’s team of business experts works one-on-one with hundreds of entrepreneurs and business owners each year by providing confidential, no-cost consulting. The center’s mission is to help treasure Coast businesses grow and succeed.

Jan. 10, 2022|

FSBDC at IRSC Highlights Client Success

FSBDC at IRSC Highlights Client Success

 

Staff Photo - DragonFly Graphics

Staff with Al Coffey, Owner of DragonFly Graphics. (Michael Spooneybarger/ Florida SBDC Network Headquarters)

What started as a family business twenty years ago has grown to a recognizable and respected brand across the Treasure Coast. DragonFly Graphics, located off Bayshore in Port St. Lucie, Florida, understands the importance of building your professional image through good branding and a memorable image amongst the public. As a trusted provider of branded material like company shirts and logo creation, President/CEO Al Coffey states the foundation of this successful enterprise started as a family business, inspired by brothers with a background in screen printing. To date, DragonFly has expanded its team past the ranks of just family, employing over twenty individuals whose skills range in graphic design, printing, and more. You can spot DragonFly Graphic’s expertise on a number of local Pop Warner Football jerseys.

Al Coffey started as an attendee of an FSBDC at IRSC Financial Literacy session, the now fifteen-year relationship has made DragonFly Graphics a high-value client for this region. While this organization’s journey started long before a connection with the FSBDC at IRSC, Al Coffey contacted the local center in 2009 while searching for access to capital for growth. Coffey worked alongside the late Fort Pierce consultant, Duke Evans, for a number of years working towards putting DragonFly’ success into a business plan to ensure they are ready for future expansion or capital. Through a relationship with the FSBDC at IRSC the organization received research via IBIS World reporting on the surrounding market. This data was used exponentially over the course of fifteen years, strengthening DragonFly’s following among local organizations.

DragonFly continued their relationship with the FSBDC at IRSC, resulting in being one of the first organizations within the region to secure an Emergency Bridge Loan at the start of the COVID-19 pandemic. Through contact with consultant Spike Schultheis, DragonFly was able to plan for use of funding from the EBL and apply for a local Small Business Recovery Grant facilitated through the FSBDC at IRSC. Obtaining both sources of funding allowed the organization to keep a full staff and continue production throughout the economic disaster. Consulting provided by the FSBDC instilled the importance of a growth plan, a goal Al Coffey has since set to achieve with the Florida SBDC at IRSC stating, “trial and error can be costly and unnecessary” in regards to having Spike in his corner, “having someone with more knowledge than me over my shoulder to point out opportunities is very valuable”.

Listing community as a core value of the organization, DragonFly Graphics is a valuable asset to the Treasure Coast. You can learn more about their organization and gain personalized branding material by visiting their website dragonflycentral.com or calling (772) 879-9800

Learn about DragonFly’s path to success by viewing their Client Success Story with the Florida Small Business Development Center, here: https://www.youtube.com/watch?v=fUjrNUH1uvA

Ready to get started on your path to success? Contact your local FSBDC at Indian River State College!

[email protected] | (772) 336-6285

Jan. 3, 2022|

Entrepreneurs learn the ABCs of problem-solving

For most people the world of entrepreneurship, new technologies and innovation exists only in Silicon Valley, world renowned research institutions or at least in the big city — right? At its core, entrepreneurship is about problem-solving. It is about creating and developing simple solutions for people’s everyday problems. One does not have to create the world’s next greatest idea to find or realize success as an inventor or entrepreneur. It is about simple solutions to everyday problems. Everyone, no matter the geographic location, would welcome these solutions to their problems. Entrepreneurial opportunities are swirling around each of us every day, but we must be listening for the problems.
Feb. 4, 2020|

IRSC Announces Winners of Entrepreneurship Challenge

FORT PIERCE– Business expansion is now possible for the student winners of the inaugural Indian River State College Entrepreneurial & Innovation Challenge. Five teams were guided through the entrepreneurship process to develop a Science, Technology, Engineering or Math (STEM) product, with support funded by the National Science Foundation. Following a Shark Tank presentation,the originators […]

Apr. 10, 2017|

Scott Deal named 2016 Entrepreneur of the Year

VERO BEACH – Exemplifying the innovation, drive and persistence of a successful entrepreneur, Scott Deal of Vero Beach, founder of Maverick Boat Group, will be recognized with the Dan K. Richardson Entrepreneurship Program’s 2016 Entrepreneur of the Year Award.

Announcement of the award will be the highlight of the Entrepreneur of the Year Award dinner […]

Mar. 15, 2016|