News from ECL Consulting, LLC - Cash Management Tips for Small Business

We are living in a period of accelerated change. Indeed, the ground does seem to be shifting beneath us almost faster than we can comprehend, so it's important to stay nimble in these difficult times.

One way you can do so is to manage your cash closely. In some cases you may need to raise your prices to cover a commodity cost-spike. Or, you may want to offer special deals to your best customers to help retain their business.

Below we offer some suggestions on how to do this.

Cash Management Tips for Small Business

Cash is the lifeblood of any small business. Here are some tips to help ensure that your business maintains a sufficient cash flow to meet its financial goals and keep running efficiently:

Toughen up your credit policies. Review the payment terms you offer to customers and tighten them up if slow payment is a problem area for your business. For instance, how long are customers given to pay? What action will be taken if a payment is missed? Be sure your credit terms are communicated effectively to customers before transactions are entered into.

Tip: Consider requiring advance payments at least in part for new customers.

Tip: For many businesses, a routine credit check should be performed before a sales or service transaction is entered into with a new customer.

Tip: Signed contracts are often an effective way to communicate the expectations of project and when payment is required.

Come up with a budget - and stick to it. Surprisingly, many small businesses do not engage in the budgeting process. A budget can be extremely effective in helping you keep track of whether cost and revenue-related goals are being met. Depending on the size and complexity of the business, the budget process might be informal or formal, lengthy or simple. Projected revenues and expenses should be broken down by months.

Tip: Setting up a budget in QuickBooks is a great way to project future costs for the rest of the year. It also gives you comparison reporting to see if you are meeting your budget as you go along.

Tip: If you don't already do so, budget for next year's revenues and expenses near the end of each year.

Tighten up billing. If collecting bills has become a problem for your business, you might want to consider increasing the intervals at which customers are billed--e.g., from three months to one month, or from one month to two weeks.

Tip: Review your accounts receivable weekly or even daily to make sure slow payers are not allowed to slide.

Contact us with questions about managing your cash flow or setting up a budget in QuickBooks.

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Ask An Expert

Q: How do I make price changes in QuickBooks?

A: Studies have shown that your best source of new business is existing customers. Targeted discounts are just one way to try to encourage your customers to take advantage of your product or services.

However, if you do offer a discount, don't just type over your standard prices on the QuickBooks invoice; create a discount calculation instead. This accomplishes two things:

Your customers see on their invoice exactly how much of a break you've given them.
You can track how successful your campaign was.

It's easy to set up a discount calculation:

Choose Lists, and then Item List.
Click the Item button, and then choose New from the menu (or press Ctrl+N).
Choose Discount from the Type list.
Assign an item name, complete the description field, and then enter an amount or a percentage.
Choose an account from the list-you may wish to create a separate account so that you can easily track the amount of discounts that you've offered.
Choose Tax or Non-tax to indicate whether the discount is applied before or after sales tax, and then click OK.

Keep in mind that discounts only apply to the previous row of the invoice or sales receipt. To apply the discount to multiple items, you must create a Subtotal item:

Choose Lists, and then Item List.
Click the Item button, and then choose New from the menu (or press Ctrl+N).
Choose Subtotal from the Type list, and then assign an Item Name and Description.

Next week, we will continue this discussion, focusing on using price levels, changing item prices and adding surcharges.

Ever have an accounting, tax, QuickBooks or cash flow management question and didn't know who to ask? Now you can Ask An Expert! Email us your questions and we will print the question and the answer in our newsletter! No question is too big or too small.

Have you enjoyed this newsletter? Have any suggestions for things you'd like to see covered? Have a question for our resident Accounting Expert? Let us know by emailing askexpert@eclconsulting.com.

Each issue will cover different topics and have different features, so watch for us each Tuesday.

Remember, we provide accounting and cash flow solutions for successful companies -- yours!

Sincerely,

Eli Larriva
ECL Consulting, LLC
(520)241-0371
info@eclconsulting.com

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