Tips for Managing Cash Flow in Your Business

KASEY STANLEY
BDR Lead Accounting Coach & Trainer

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, and the weather doesn’t cooperate.

BDR has a powerful tool called the Cash Flow Projection workbook that can help owners develop a plan and find a sense of control for the near future. Most businesses fail due to poor cash flow but not because of their ability to make a profit.

What is Cash Flow?

Cash flow is the money that moves (flows) 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.
• Debt payments (such as vehicles or a line of 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 who don’t get paid on time will leave!
• Tax planning.
• Growth/capital expenditures—As a company approaches an overhead cycle, it may spend cash on expansion (vehicles, buildings, etc.).
• The company can be a mechanism for an owner to achieve their personal goals.

Complete 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 Cash Flow Projection workbook.

You will need the following to complete the workbook:

• The last three months of financial reports.
• Projected revenue.
• Projected COGS percentage.
• List 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 accounting coach and head coach to complete the workbook.

What’s Next?

Once the Cash Flow Projection workbook has been completed, your head coach can help with further analysis or adjustments. You must continually monitor 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 terms of the sale 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 accounting 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 improve your cash flow management. This will result in better business decisions and help you feel more in control of your company’s future. Having cash provides flexibility and freedom!

About the Author

Kasey Stanley brings considerable expertise and practical experience to her role as Lead Accounting Coach for BDR’s clients. She has over 20 years of accounting experience, with the last 10 years in the HVAC industry. Kasey had direct management responsibility for many implementation projects, including bookkeeping, IT systems, website & Marketing programs, office operations, service operations, and installation processes. She also attended BDR’s Profit Launch with her first HVAC employer, working with him to build a BDR-caliber business plan for the company. Kasey moved to a larger company that needed to modernize, upgrade, and streamline all aspects of its business operations. Her role quickly evolved from consultant to a full-time dual role of GM & Controller, where the company grew steadily and increased sales efficiency by some 65% during her tenure.