Five Cash Leaks to Avoid

Cash flow improvement is a hot issue for small businesses; in many businesses, it seems like there is never enough cash when you need it.  The last thing a business owner wants is to reduce their cash balance unnecessarily.  To help you preserve or increase your cash, here are five cash management leaks to avoid.

1. Bloated Bank Fees

Some banks are more business-friendly than others.  We recommend you assess the fees you are currently being charged to see if you can discontinue any unnecessary services. 

•  Could you maintain a cash balance to avoid monthly fees?
• Are you being charged online banking fees and bill pay fees, and are these still necessary?
• Are you being charged for a high volume of transactions or cash drawer services, and are these competitive with other banks? 

Banks, including national brands, that have not kept up with technology and have not automated a significant amount of their transactions are inefficient and must charge higher fees to cover their processing costs.  If your accounts are located at one of these costlier banks, you do have a choice. 

2.   Overtaxed

Are you sure that you are paying the lowest amount of taxes you legally owe?  There are several places to look to make sure you have not overpaid taxes anywhere in your business or personally:

·         Payroll taxes

·         Sales and use tax

·         Franchise taxes

·         State and local income taxes

·         Property taxes

·         Federal income taxes

·         Taxes that are specific to your industry

In preparing income taxes, a few of the easiest items to overlook include carryovers from prior years and new deductions you become eligible for.  If you received a large refund this year, congratulations, but that means you gave Uncle Sam an interest-free loan on your money.  You can do better next year by estimating your tax payments and paying only what’s due.   

3. The Check Is in the Mail

Customers who take too long to pay you are big cash drains in your business.  Consider changing your terms, asking for deposits, or becoming more aggressive with collections to bring your DSO (days sales outstanding) down.  When you do, you’ll get an instant, permanent cash flow improvement.      

4.  Sweat the Small Stuff

You may have an eagle eye on your largest bank account, but what about your other cash stashes?  PayPal, petty cash, and business savings accounts are among the places that may not get daily scrutiny.  Make sure those accounts are properly reconciled and have the proper controls in place so funds don’t go missing. 

5.  It’s in Your Interest 

A nice problem to have is when your bank balances get too large and you don’t need the money immediately.  Make sure that money is still working hard for you by putting the excess in an interest-bearing account.  It’s not much these days, but every little bit helps.

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Make a Dash to the Cash  

If we can help you plug any of these cash leaks in your business, please don’t hesitate to reach out and let us know.

The Fine Art of Prioritization

Running a business usually means putting in over 40 hours a week.  In fact, if you’re the typical entrepreneur, you have more ideas you want to implement than you have time for!  That’s when proactive, strategically executed prioritization can make all the difference. 

So Hard to Choose    

If you have lots of ideas in your head or on your “to do” list that are not getting done, you’re certainly not alone.  Here’s a process for helping you decide what to do first, next, and not at all. 

Step 1:   

Write down all your ideas, tasks, “to do’s,” projects, and even items you need to do on a daily basis.  Use a spreadsheet and list each item in a row by itself.  Later you’ll want to be able to sort the list, so we recommend using Excel or another spreadsheet software. 

Once you have everything down on paper, you will be amazed at how much this unclutters your thinking.  You will also have all your great ideas captured so you don’t forget them.  You might also get very overwhelmed, but don’t stop now.  Relief is on the way.

Step 2: 

Add some information about each item, creating four additional columns:

A.   Is this item about working IN your business (client work, overhead, etc.) or ON your business (new products or new services, developing procedures, hiring more staff, marketing, creating new partnerships)?

B.    Is this item revenue-generating?  Or will you lose revenue if you don’t get it done?

C.    Can you delegate this task or does it have to be done by you?

D.   If you were to hire someone to do this task, how much would it be worth per hour?

Step 3:   

Analyze your choices.  Once you have these additional items filled in, you can go wild with opportunities.  Here are some very cool eye-opening activities to try:

• Separate tasks that are working ON vs. IN your business.  There is never enough time to work on your business, so force it by blocking out a few hours or a half-day a week and do it, no matter what.  It might be the best way to make progress in your business. 
  
• Sort the list by how much revenue the task could generate or how much potential it has, and decide how to prioritize from there.  If you need help calculating the ROI, return on investment of an idea, we can help you calculate that. 
  
• Take a look at what you marked “not able to delegate,” and ask “why not?”  Does a procedure need to be written?  Do you need more staff?  Does your staff need training?  Or do you need to learn to let go?  Whatever it is, and especially if there are a lot of these items, get these roadblocks tackled so you don’t become the bottleneck in your own business.
  
• Sort the list by “column D” above, the market value you recorded for the task.  Then ask yourself what your hourly rate is.  How many tasks are you doing that are below your hourly rate?  Hiring someone to do your lowest level tasks could very well be another item you need to add to your new “to do” list! 

This last one is really important, because it can so strongly affect the profitability of your business.  The last thing you want to do is go backwards and give yourself a demotion with a pay decrease, but that’s exactly what you’re doing each time you do a task yourself that’s at a low market rate. 

Step 4:   

Prioritize with confidence.   With all of this information in an organized spreadsheet, you will gain the clarity you need to make some powerful decisions about how to spend your time.

Time

There’s nothing more precious and scarce than our time.  Every day, we have a choice about how to spend it, but too often we get caught up in the urgent, but not important, daily fires.  This exercise helps us take a step back and look at what’s important instead of what’s urgent.