Tag Archives: managing cash flow

Create a Budget

Cash Flow Management: Creating A Budget To Reach Financial Success

Tracking of cash flow dates back more than 3,000 years. Before currency existed, people would use cattle, grains, silver or other items of value as trade. These transactions, tracked on tablets or sometimes counting tokens, were used as a tool to track financial dealings. This tells us that managing trade or cash flow has been around for decades and is a critical factor when it comes to managing finances. Some important elements are creating a budget, emergency fund planning, debt management and savings strategies.

When it comes to planning for future goals, a budget can be a very useful guide to help reach financial success. A budget helps project future cash flow needs and can be a great tool to assist with preventing financial problems and increasing net worth.

Before putting a budget together, one will need to gather data on past spending and income. The budgeting process should include: estimating income, estimate of spending, and planning for savings. Begin by putting a preliminary budget in place which will include goals and priorities for each goal. Track these goals on a regular basis and make necessary changes when needed.

One of the top priorities of a budget is having an emergency fund. This is critical and is often overlooked. Many planners recommend having at least three to six months of expenses, but with the increased cost of goods and services today, many feel that six to nine months is best. Expenses should include fixed cost and variable cost. Emergency funds should be in a high liquid type of account, such as a savings or money market account.

Debt management has become a very challenging issue today. Hopefully, with the degree of issues we’ve seen in the last few years, people will see the importance of managing their debt closely.

Three common rules of debt management are: total monthly debt should not exceed 36 percent of gross income, mortgage payments should not exceed 28 percent of gross income, and consumer debt should not exceed 20 percent of gross income.

In our fast-paced society and with the current availability of credit, it can be difficult to stay within these parameters. However, using these rules as a guide and implementing them can help us get back to managing our debt within a reasonable level. Financial debt will eventually catch up to us, but before it does, we can take responsibility now to control it before it controls us.

Many people who begin to think about saving usually consider it only when they have excess or residual income. Saving should be planned as part of a budget sooner than later, not just when it’s convenient. Delaying saving usually ends up never happening or may be too late to be beneficial. At a minimum, it is recommended to save five to 10 percent of income annually. I also suggest to increasing the saving percentage every year; this will help keep up with inflation and allow investors to get a head of the saving game.

These are important factors and planning tools that can help with implementing or adjusting a financial plan and managing cash flow. The earlier an individual, household or business can start, the more likely for success.


Securities and investment advisory services offered through ING Financial Partners, Inc. Member SIPC. Jacob Gold & Associates, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc.

This information was prepared by Michael Cochell of Jacob Gold & Associates, Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.

Managing Cash Flow, Increasing Cash

Managing Cash Flow And Increasing Cash Balance

The phrase “Cash is King” has never been more true in business than it is today. Unfortunately, while many companies are finding themselves short on cash, lending requirements have become extremely stringent. Moreover, increasing sales don’t always equal increased cash flow ― especially if the sales are credit sales. Managing cash flow effectively requires close attention, just like managing the rest of your business. The good news is that a little attention can go a long way toward increasing cash balance at the bank.

As with all good things, a little work is required so let’s look at how you can improve some of your operating processes and manage cash flow, which will increase cash.

Here are a few tips that can have an almost immediate impact on managing cash flow and cash position:

1.    Set a price and term policy, then stick to it

Make sure all employees understand the importance of discussing pricing and payment terms during the sales process. Often the emphasis is placed on “getting the sale,” not “getting paid.” When customers delay payments, they’re using your cash and costing you money. Basically, you are financing their business. Be diligent about setting payment expectations right from the beginning with your customers.

2.    Send out invoices in a timely manner and follow-up promptly

The quicker you send out the invoice, the sooner the clock starts ticking for a customer to pay. Send out invoices promptly and follow-up immediately with a courtesy call. A courtesy call isn’t a collection call but a call just to check in with the customer and make sure the invoice has been received.

3.    Offer payment options

Do you only accept checks? Offer other options such as electronic transfer, wire payment or credit card. Make it easier for customers to pay you.

4.    Clean up  inventory

When was the last time you took a look at your inventory? Are you still selling Sony Walkmans? The 80/20 rule applies to inventory ― 20 percent of that inventory is turning while 80 percent sits idle, taking up space and costing money to finance. Consider running a clearance sale or re-merchandising product to free up this cash.

5.    Ask vendors and suppliers for a discount

When you purchase goods or services, always ask if there is a discount offered for paying early or with cash. A five percent discount for paying now, versus in 30 days, is like getting a 60 percent discount on an annual basis. Don’t be afraid to ask; the worst they can say is “no.”

6.    Customer deposits

If you’re offering aggressive pricing or giving concessions, don’t be afraid to ask for something in return. This is a great time to ask your customer to pay a deposit at the time of order, or prior to starting a job. This helps cover your up-front costs, and the risk associated with non-payment is decreased when your customer has some investment in the transaction.

7.    Require a minimum order for credit sales

Invoicing, collecting, receiving and depositing checks is a time-consuming and expensive process. Establishing a minimum credit purchase requirement eliminates having to chase small amounts, promotes larger orders and collects payment for smaller ones at time of sales.

Cash flow is the lifeblood of your business. You can sell a million widgets, but if you only get paid for 50 percent of them, your business is destined to fail. Making changes to your operating processes and managing cash flow is a way to keep your business healthy, vibrant and able to meet its obligations.

[stextbox id=”grey”]Robyn Barrett is founder and managing member of Factors Southwest LLC, specializing in factoring financing for small to mid-size companies. For more information about managing cash flow and increasing cash balance, visit www.factors-southwest.com.[/stextbox]