Managing Cash Flow outside your Company

Managing Cash Flow outside your Company hinges on 3 major factors. 1) Your bank and how well it operates for availability of funds, 2) Customers and 3) Vendors.

The bank that you decide to go with to deposit the checks you receive and how long it takes to clear could be a factor when you are opening an account. Also the rates they charge for loans, the collateral that they require, and the reputation of the bank will also be of interest. Asking the hard questions of bank representatives prior to putting your money in them, provides more leverage, than after you have an account there. You may want to make an appointment to interview the banks representatives’ and get commitments or proposals on what they are willing to do for you. Due to the influx of banks, they should be competitive.

Customers are what you are in business for. The more customers you have the more opportunity the company has for growth. Customers can be a problem to you, if they get into a cash crunch, and do not pay for the services in the terms provided. It is very difficult to collect funds when you are strapped for them. Be sure to re-iterate the terms to your customers during economic slowdowns. There is always a risk that they will go to someone else that may be cheaper, or will extend them more credit, but if they can not pay, you are better off not bankrolling them. Be sure you have a customer cash policy and that your employees know it too.

Vendors are your life line between your product and the customer. You need raw materials if you are a manufacturer or a contractor. You need supplies or parts if you perform a service to your customers. Companies are unable to create and supply all of the materials needed to customers on their own. They need vendors to help them put together the finished product. Leveraging the vendors you use may come in handy when you are in a cash crunch. Keeping in touch with vendors to update them on your situation can be very helpful in keeping them as a vendor. When vendors call for money, they do not use the strong arm tactics at first. But if your Bookkeeper continues to give excuses to the vendors, they have no other option than to cut the company off from purchasing. If a company has not planned for best practices in all departments of the firm, it can lead to some unpleasant customers and employees. Be sure you have a vendor policy and know the terms when purchasing products.