Steady and Strong Cash Flow

August 10, 2013 | Roger and Susie Engelau

What would it mean to you to be confident that your cash flow was steady and strong? When I was in my early months of business ownership my cash flow was sporadic – that’s painful! Since then I’ve coached many business owners like you to strong, steady cash flow. Reducing expenses and the time it takes to get your money for services rendered are two ways to get your cash flow under control. Here are some fast-acting, sure-fire ways to accomplish those goals:

 

1. If you sell equipment as part of your overall product, water softeners, for example, or computers, require the customer to pay 50% of the job quote up front. Use the deposit to pay for the equipment you have to purchase before you actually deliver the product. Then you’ve got cash to cover your cost and you’re not carrying that cost on your books for 30, 60, 90 days or more.

 

2. Focus on the profitability of the work you do. Create work flow systems to dramatically improve your efficiency to reduce the cost of delivering your service. A heating/cooling company has a service guy who stops to get coffee on the way to the 1st job of the day. He arrives and makes a phone call to his daughter before knocking on the door. He chats with the customer an extra 10 minutes, brings one tool at a time to the work site, spends more time than necessary chatting with the customer afterwards, makes another phone call, this one to his accountant, then leaves. He stops to pick up a few parts at the supply house and talks to the clerk about football, goes to the 2nd job, realizes he needs another part, leaves mid-way through the job to get the part, returns to the job, chats with the customer…all these little things add up and soon the delivery of the service has become expensive and your profitability has evaporated.

 

3. You can minimize your outlay and labor per dollar of revenue. Let’s say the average labor cost to fix an air conditioner is $50, or about 2 hour’s work, and you’re getting $90 for that service. Resolving many of the issues described above and using other strategies to minimize non-productive hours can easily reduce your average labor time per call by 40 minutes. If you can decrease your $50 cost by just $15 and you make 20 calls a week you’ve just generated additional profit of $300/wk or $15,600/yr!

 

4. Minimize the money owed to you. First, change your terms from 30 days to “due upon receipt,” 7 days, or 14 at the most. Provide financing and/or take all credit cards. Remember, the money is always better in YOUR account.

 

5. Get a good collection process in place. Have accounting systems that immediately alert you to past-due payments. When the time comes for the bill to be due, send a letter. Right then. Do this on a steady pattern with friendly but more aggressive language for all past-due accounts. Once you let it get past 30 days, the chance of getting paid decreases and if it gets to 90 days, the chance that you’ll ever collect it is little to none.

 

6. Reward customers who pay early. For example—give them a 2% discount if they pay within 10 days. If you don’t want to give cash, find a “free gift” to offer instead. People love free gifts. Conversely, charge interest on overdue accounts. Start charging on the day after payment terms expire. Usually 1½% per month is charged on the outstanding balance.

 

7. If your ads aren’t making money, stop running them. You should only run ads that make you money immediately. Test and measure every ad to make sure you’re getting a good return on investment of every marketing dollar. A veterinarian pays $695 a month for an ad in the local newspaper. The ad brings in 10 customers in the first month who each spend on average $60 with a gross profit of $25/customer. So he spent $695 to create $250 in profits. (By the way, he could stop running the ad but since he’s getting some business, he should first try changing it to see if he can get the ad to produce more business).

 

8. Finally, this is so simple you’ll be in danger of rejecting it at first. Raise your prices. The majority of my clients have been so afraid of running off customers, some haven’t raised their prices in years! However, in all the times I’ve coached my clients to do it, never once has a customer complained and left! Here’s an example:

 

I asked one restaurant owner what item she sold the most of and she replied, “hamburgers.” I asked her how many she sold and she said about 200 a week. She’d been charging $5.95 since 2007 so I suggested that for 1 month she try raising the price to $6.75. She sold the same number of burgers at the $.80 increase. That made her an additional $160 per week. Six months later she raised the price to $7.29. By then she was selling an average of 225 burgers. At the end of the 6th month she was making $1.34 more per burger – an increase of $450.00/wk. That’s $1935.00/mo. She made over $23,000 more per year in positive cash flow all for a modest price increase on one product.

 

If you’d like to get more of my cash flow strategies, you’re invited to my FREE webinar, coming up on August 29 at 11:30 am EST, to help you learn EXACTLY what you need to do to implement a cash flow strategy that works!

Register NOW The CEO’S Guide to Strong and Steady Cash Flow

This could be the best hour you spend on your business in 2012, and it’s FREE! In just 60 minutes you will…

  • Get my 7 fast-acting, sure-fire ways to find and reduce unnecessary expenses while you watch your net profit skyrocket
  • Find out how to make more $ from each customer… this formula is the most important customer strategy anyone can learn
  • Discover how to put an end to “rollercoaster-income” once and for all
  • Get a list of expense reductions that you can do quickly and that will increase your net profits—overnight!
  • Learn what processes to put in place to make collections simple and effective and save 5 hours a week in time spent trying to collect accounts payable

Don’t miss it!

Register NOW The CEO’S Guide to Strong and Steady Cash Flow

Much success, Coach Roger Engelau