Coaches Corner: Tips for Managing Cash Flow in Your Business

Coaches Corner September 2019

Tips for Managing Cash Flow in Your Business

Sometimes in business it feels like much of what happens to us is beyond our control; vendor costs go up, the phone stops ringing inexplicably, the weather doesn’t cooperate.  BDR has a powerful tool that can help owners develop a plan and find a sense of control for the near future.  It’s called the Cash Flow Projection workbook. CASH IS KING!! Most businesses fail due to poor cash flow…not because of their ability to make a profit.

Understanding cash flow

Cash flow is the money that is moving (flowing) in and out of your business in a month. At the most fundamental level, a company’s ability to create value is determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow. Some examples of these transactions include cash coming in from customers, paying suppliers, overheads and debt payments, such as vehicles or a line a credit.

Advantages of projecting cash flow

Think of the cash flow projection as an “early warning system” and use it to identify potential shortfalls in cash balances. Control cash expenditures to get through seasonal changes. The HVAC business is cyclical in nature.

  • Negotiate debt repayment with vendors. Suppliers who don’t get paid will soon stop supplying. Even worse, employees that don’t get paid on time will leave!!
  • Tax planning
  • Growth/capital expenditures – As a company approaches an overhead cycle, they may outlay cash for expansion (vehicles, building, etc.)
  • The company can be a mechanism for an owner to achieve their personal goals.

Completing the Cash Flow Projection workbook

If you are interested in a tool that will help you manage your cash flow, ask your coach about completing the BDR resource Cash Flow Projection workbook.

You will need the following to complete the workbook:

  • The last three months of financial reports
  • Projected revenue
  • Projected COGS %
  • Listing of all active loans and credit cards including minimum monthly payment and balance owed
  • Verify cash is being reconciled properly and is up-to-date
  • Line of credit balance owed
  • Correct/Reviewed Accounts Receivable balance
  • Correct/Reviewed Accounts Payable balance
  • Work with your Financial and Head Coach to complete the workbook.

Once cash flow is completed

Once the Cash Flow Projection workbook has been completed, your Head Coach can help with further analysis/adjustments. You must continually look out to see the cash flow impacts on your business. By using this planning tool, you become more strategic when planning and securing your company’s success.

Ways to increase cash flow

  • Show the sales terms on all proposals and contract forms. Ask for down payments, offer financing on every job, and enforce those terms.
  • Have a written collection policy – talk to your Financial Coach!
  • Have weekly collection meetings.
  • Collect COD on all accounts. Service accounts should be collected by technicians on call.
  • Post billing and payments daily.
  • Return or dispose of inventory that is not turning within 30 days.

Practice and get better at cash flow management. This will result in better business decisions and will help you feel more in control of your company’s future. Having cash provides flexibility and freedom!

Kasey Stanley

Financial Coach