Cash Pay Advance

Managing cash flow is every small business owner’s most
important function. Avoid these seven deadly mistakes to make
sure you aren’t creating cash flow problems in your business.
1. Using the “Fly By The Seat of Your Pants” Accounting Method.
When tax time rolls around do you find yourself pawing through
piles of paper on your desk looking for credit card receipts
from your business trip? Or are you upside down digging under
the seat of your car trying to figure out where all your gas
receipts are? Are you wondering if that coffee stained piece of
paper is an invoice from a supplier? Do you have a vague feeling
that someone, somewhere owes you money but, you just can’t
remember who it is? If so, you’re probably guilty of operating
with the “Fly By the Seat of Your Pants” accounting method.
Using this accounting method has a tremendous impact on your
business’s cash flow. Unless you have a system to track your
business finances, you’ll always be operating in the dark and in
danger of imitating George of the Jungle as he slams into a tree.
2. Not Knowing What the Numbers Are All About.
Once you have a real honest to goodness useful accounting system
that’s where the real fun starts. You’ve got a bunch of numbers
but what in the world do you do with them? Understanding what
the numbers mean is crucial to your cash flow. Are sales
trending up or down? Are expenses rising faster than sales? Is
one product more profitable or better selling than another? How
much do I need to sell to meet expenses each month? Can I take a
paycheck this month? The answers all lie in the numbers.
3. Mismanaging Credit: I Owe You, You Owe Me.
There are two ways to mismanage credit in small business:
1. Granting credit without wise credit policies 2. Using credit
with no plan of how to pay the bill.
Both have a huge impact on your cash flow and are often closely
related. Here’s a scenario to demonstrate that point. You have
an opportunity to work on a big project but to do the project
you need to order materials. So, you order materials from a
supplier who expects payment in 30 days but you won’t receive
cash for the project for 60 days (or 90). Immediately you’ve put
yourself into a cash flow crunch that could take months or years
to recover from financially. In the meantime you’ve passed on
smaller jobs that would have provided quicker cash at less cost.
And, if you’re not able to come up with the cash for your
supplier, you’ve endangered that relationship as well.
4. Ignoring the relationship between Receivables and Payables.
Do your Receivables and Payables “play nice” with each other? In
a perfect world your receivables (what customers owe you) would
be paid just in time for you to pay your payables (what you owe
your vendors). But, if you’re a small business owner you know
Rule #1 is “Stuff Happens”. The customer you thought would pay
his bill this week, doesn’t. So the bills you thought you could
pay this week, don’t get paid.
Are your Payables in balance with you Receivables? If what you
owe to others is far more than what is owed to you, then,
Houston, you have a problem.
And it’s not just the balance that’s important, it’s the quality
as well. If your receivables are as old as your Aunt Tilly,
chances are good you’ll never see the cash.
5. Focusing on profit instead of cash flow.
Ahh, Profit. The ultimate goal of every business. Or is it? Did
you know that many businesses that fail are operating at a
profit? How can that be? For the small business, cash flow is
the ultimate goal. No cash flow. No business. Period.
What’s the difference? Mostly the difference is in the decision
making process. “If I take on this big job, it will earn me a
huge profit, but if I take on five smaller jobs, I’ll have cash
to pay my bills.” Yes, you want to be profitable but every
decision has to be measured against the effect it will have on
cash flow.
6. Forgetting your debt to society.
Some bills are easy to forget. Bills like sales tax, payroll
taxes, estimated taxes. They sort of sit out there, almost off
the radar screen. They don’t have to be paid right away. It’s
easy to forget them until BAM! they’re due and they’re due right
now. And you better have the money to pay them or you’re in hot
water with the Tax Man. That’s not a place anyone wants to be.
Pay them late or not at all and you end up with penalties and
interest on top of what’s already due. Cash flow problems result
as you rob Peter to pay Paul. It can take months or even years
to recover.
7. Spending your company’s future on a speed boat.
Haven’t you always wanted a speed boat? Or a fancy car? Or an
all expense paid trip to the Bahamas? It might be tempting to
try to pass your personal purchases off as tax deductible
business expenses. But, it’s a bad idea for two reasons.
The folks who work at the IRS are over-worked but they’re not
stupid. The last thing you need is an audit. An audit that could
reveal your transgressions and could result in an unexpected tax
bill plus penalties and interest. Again, huge cash flow headache!
Here’s the other reason it’s a bad idea. Are you spending your
company’s future on frivolous or unnecessary expenses? Small
businesses operate close to the edge. Unless you have a reserve
to see you through the tough times, you’re always in danger of
being on the wrong side of that edge. You’ve got to take care of
the golden egg laying goose first. Then, you can pay yourself a
properly taxed bonus and buy all the toys you want.