Don’t take cash flow for granted

By Jean Kruse / Guest Editorial

Without oil, your car won’t run. Without water, your plants will wither. And without good cash flow, your small business is almost certainly doomed.

Cash flow problems are common in business. The potential causes of cash flow problems include:

    • Too much cash tied up in receivables.
    • Too much cash tied up in inventory.
    • Too many deadbeat customers, leading to bad debts.
    • Out-of-sync credit terms. For example, customers have 30 days to pay but suppliers must be paid within 14 days.
    • Spending too much on overhead.
    • Weak gross margins, which could mean prices are too low, direct costs are too high, or some combination of the two.
    • A lack of profit, which will eventually lead to a lack of cash.
    • Growing too quickly.
    • Failing to maintain organized books, making it difficult to figure out which of the above is the culprit.


Despite its importance, cash flow is relatively simple to monitor and manage. It comes down to making certain that more cash enters your business than exits your bank account.

The first step toward ensuring a healthy cash flow is converting sales into real money as quickly as possible. That boosts your bottom line, and provides a safeguard against unpleasant surprises such as slow or non-paying customers and unexpected expenses.

One way to shift cash your way is to ask for all or a portion of payment up front. Asking for at least a deposit before you begin work protects both you and your customer. And if you establish the policy fairly and properly, it shouldn’t alienate good customers.

Accepting credit card payments also can help speed cash into your account, though it does require a small transaction fee. If you already have a merchant credit card account, encourage customers to use this option more often. Also consider new technology such as Square, which allows credit card transactions to be made using smartphones, regardless of where you do business. This technology expedites the flow of cash into your bank account, sometimes as quickly as the next business morning, and adds a welcome measure of convenience for your customers.

A healthy cash flow also requires close attention to your receivables — the money that customers owe you for products or services you’ve delivered. Create a detailed “aging schedule” of what you are owed, by whom and for how long. Call overdue accounts, focusing first on the largest amounts due. Don’t rely on email unless you feel certain you’ll receive a response. Most people hate making collection calls, but it is necessary, so have someone in your organization who is respectful but firm take on the task. If the calls are unsuccessful, turn the accounts over to a collection agency and stop providing products or services to customers who do not pay.

Seek advice from your accountant about whether your business is charging enough for your product or service and if your overhead is too high.

An accurate cash flow projection can alert you to trouble well before it strikes. To get a free Excel cash flow template, go to the SCORE national website,, and type “templates” in the search box. You will find a list of all kinds of business templates that can assist you in managing your financials.

SCORE is a nonprofit organization of volunteer business mentors who provide free, confidential business mentoring and training workshops to small business owners. To sign up for a SCORE mentor, you can visit the organization’s local website, Click on “Request A Meeting” in the green box on the right side of the screen. In the explanation of what type of service you want, be sure to include as much as possible about your business so that the assignment person can find the best fit for you from the more than 60 volunteer mentors in the area.

If you prefer online mentoring instead of face-to-face meetings, go to and enter your business question in the space beneath the box that says “Get Free Business Advice Via Email.” The website will give you a list of SCORE volunteers from all over the United States who have expertise in the subject question; you can then choose the person you think will be best able to assist you.



Jean Kruse is a SCORE counselor and SCORE Iowa district president. She operated her own CPA firm for 13 years and in 1988, joined RSM McGladrey, a national firm, where she provided accounting and tax services to small businesses.