Start Your FREE Membership NOW
 Discover Proven Ways to Be a Better Law Office Manager
 Get Our Weekly eNewsletter, Law Office Manager Bulletin,
    and MUCH MORE
 Absolutely NO Risk or Obligation on Your Part -- It's FREE!



Upgrade to Premium Membership NOW for Just $90!
Get 3 Months of Full Premium Membership Access
Includes Our Monthly Newsletter, Office Toolbox, Policy Center, and Archives
And MUCH MORE!
BLOG

Is your firm struggling with cash flow?

By Brenda Barnes  bio

Henry Ford once said, “Vision without execution is just hallucination.”

While revenue production is the core goal for every business, the real magic is in understanding and managing your cash cycle. You can’t execute without cash.

According to Patty Block, consultant and owner of The Block Group, many small businesses struggle to appropriately price their services, define their billing and collection terms, and manage the cash flowing through their companies. If you are not developing and implementing cash strategies, you are leaving money on the table.

Early warning signs can be:

  • Struggling to pay bills
  • Payroll is a constant worry
  • Afraid to hire staff
  • Charging too little and over-delivering on services
  • Trouble collecting what is owed from clients

How to fix it

Ignoring these early warning signs leads to serious consequences. The good news is that there are many things you can do to speed up your cash cycle, enhance profitability, and gain control of your finances. It can be as simple as establishing a pro-active billings and collections process or as complex as changing your pricing and reducing expenses.

While this may feel overwhelming, by working with a business advisor, you have a guide to help you develop and implement these proactive cash flow tactics:

Launch ‘Collections Monday’: Schedule courtesy calls to clients before the payment is due. Ask if they received the invoice and whether they have any questions. Name it something clever, like ‘Collections Mondays’ and get in the habit of making these calls. E-mail is for cowards—pick up the phone!

Keep your cash for as long as possible: Prioritize payments to vendors and maximize the time allowed to pay. Stagger payment dates so you don’t have significant cash flying out of your operating account all at once. Maintain your good relationships with vendors and negotiate terms when possible.

Get to know your banker: Ensure that all of your bank accounts are federally insured. The coverage is different for personal and business bank accounts. Meet with your banker regularly to establish a strong relationship. Think of the banker as your advocate.

Stop using sales tax or payroll tax money to float your operations: This is dangerous on so many levels. Your exposure to potential penalties, fees, and interest, along with a significant waste of your time and resources should stop you in your tracks. Deposit funds into additional bank accounts, separate from your operating account—and don’t touch the funds until you pay the required taxes. Obtain short-term operations financing, if needed.

Obtain a business line of credit: You can only get a line of credit or loan when you don’t need it. Plan ahead and have this safety net in place, with the added bonus that it can help you build business credit. Compare terms and rates between banks and with credit unions.

Carefully track use of company credit cards: Set limits on all cards used by employees. The federal Credit CARD Act protects consumer credit cards but excludes those used for business and debit cards. You may have significant exposure to fraud and theft with company credit and debit cards.

Outsource important compliance functions, such as payroll: Leave the headaches to the experts who will process payroll, collect and pay your payroll taxes, and ensure reporting compliance. It is worth every penny.

Work with a business advisor: Tactics are important but an overall financial strategy will determine your company direction. Business advisors bring a wealth of experience and knowledge to help you chart this course. Business owners routinely hire bookkeepers to keep track of funds, an accountant to ensure financial compliance, and an attorney to collect overdue accounts, but they seem hesitant to hire an expert to develop the financial strategy. Don’t make that same mistake.

Henry Ford built his reputation and his company with an innovative vision and an expertly executed plan. As a small company, you, too, have the ability to spot trends from real data and real market experience, and make decisions that you can implement quickly. This gives you a competitive edge, especially against larger companies that often struggle with bureaucracy and chain-of-command.

But first, you need to ensure you have the cash to execute on your vision.


Editor’s picks:

Use weekly financial reporting to keep partners aware of cash flow


Louisiana firm sets up four sure-pay systems


Some not-so-difficult ways to increase revenue



(-0)