Published on 2/25/2016
Writtin by: Paul Bogdanoff, CPA, Stacia Getz
When business owners start to feel the choking effect of a slow cash flow, they often blame their customers. “Why aren’t we getting paid on time?!” But it’s important to remember that cash flow is affected by a variety of elements. For example: Operating expenses and overhead can have a significant impact. Here are five often-missed ways to cut costs and improve cash flow:
1. Review your rent or mortgage. Can you negotiate a lower rent with your landlord or refinance your mortgage? Also look into whether you may not need as much office space if you’ve begun to allow many employees to telecommute or job share.
2. Implement energy efficiency improvements. You’d be surprised by how much of a difference little changes can make to lower your utility bills. For example, draw the shades in the summer and adjust the thermostat a few degrees. Or look into whether it’s time to make an upfront investment in better windows or HVAC equipment. A company may be able to time these expenditures to reduce taxes.
3. Take a close look at travel and entertainment expenses. Can you pare these down by conducting more meetings via teleconferencing or using a Web-based application? Can you cut back on expensive meals and, if applicable, sports and concert tickets for clients? Clearly, you don’t want to diminish relationships with clients and vendors by cutting back too much. But there may be ways to save.
4. Slow down shipping expenses. Employees often send packages overnight when two- or three-day shipping would suffice. Establish or re-establish clear policies. In addition, you might be able to find some lower cost shipping arrangements by comparing providers. Explore options to electronically deliver documents.
5. Review credit policies. Set policies that motivate your customers to pay their outstanding invoices promptly. Some examples would be to add interest to invoices that are past due or monitor customers receivables and contact customers before their invoices become outstanding.
Give us a call. Bogdanoff Dages and Co., P. C. would be happy to take a comprehensive look at your company’s expenses and collection procedures to assess how they’re affecting your cash flow. Most likely, we may be able to make some strong money-saving recommendations.