Cash Management for Small Businesses

As a small business owner, when times are tough and cash is tight, I really only see two options:

• Borrow more cash from the bank, credit cards, loan sharks, etc.
• Become meticulous with your cash management program

Through the seasonal slowdown in the coffee business, my partners and I are trying to employ the latter concept. I actually think that I'm inventing new cash management strategies on the fly in our attempt to weather the storm of a seasonal business.

The first and most obvious strategy is to pour over every bill we receive for accuracy. This is the first line of defense. You would not believe how many invoices are not accurate. Almost every vendor that I use has had at least one mistake over the last 3 years.

Secondly, pay close attention to due dates. If a bill is due 8/25/08, It is more than likely that I'm going to physically take that payment to the post office on the 24th and watch them post mark it that day. 99% of vendors utilize the postmark to determine on-time payment. A postmark before the due date is a show of good faith.

Thirdly, utilize the credit card grace period. Many vendors will allow you to charge your invoices. This is huge when cash flow is tight! You can actually charge your payables on the due date and get yourself a free additional 25 - 30 days of cash flow from the credit card company.

Finally, when things are really tight, you can employ the concept of Stretch Payments. Make a call the the vendor (they usually value your business). Let them know that things are tight, and ask if you can cut their invoice into 5 pieces over the next 5 months. This is interest free cash flow, and 90% of the time vendors are happy to work with you. They have a vested interest to help you get through the tough times and ultimately succeed.

Good luck with the cash flow, goodness know I could use some these days. I hold out the hope though that it is always darkest before the dawn, and in the coffee business, the dawn is the crisp, cool fall weather that is just around the corner!