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t have 100 planes trying to land simultaneously on two runways. We regularly see clients line up their monthly bills, sit down and write all the checks at once. They hope that they put aside enough cash or that the...Mark each envelope with the date you should mail it in order for it to land on time and without crashing into another check. Stagger the payment dates by setting up three tiers for disbursement of checks:
•Tier 1: Must Pay Group – These are the checks that can hurt you the most either in cost or ability to operate your business if they aren’t paid. This includes items like payroll, taxes, rent or late utility bills.
•Tier 2: Important to Pay – Items like oil bills, utilities and insurance payments will often have a reasonable grace period or a financial penalty modest enough to take advantage of having this cash on hand when needed. But these are still important bills to pay because you don’t want to get cut off. There‘s nothing more destabilizing than having your electric shut off in the middle of a business day. You could lose customers and employees who worry about the health of their employer.
•Tier 3: Flexible Payment Opportunities – Suppliers, vendors and wholesalers who supply most small businesses are the best sources of flexible financing. Many of these are happy to work with a stressed business as long as there are regular payments scheduled, even if they are small. These suppliers will often continue to deliver as long as you keep open channels of communication and make payments with regularity.

2. Make it real! Pay on revenue you have, not on the sales you are hoping to make. Would you land a plane hoping that the runway is beneath you in that fog bank? No, you want to know it is there, so only make payments knowing your sales are in the bank. If you know what you have, you will know what you can pay.

3. Stop using sales tax money to float your operations. It will cost you far more in potential penalties, fees, interest, time and aggravation than obtaining some short term financing. The most prudent strategy is to discipline yourself to deposit all the sales tax money you collect each day into a separate bank account. Tax liabilities grow because business owners use the tax money they collect as working capital for their operations.

4. Invest in a payroll service. The two biggest cash flow crunchers are payroll and sales taxes. It may seem like an unnecessary cost for very small businesses, but a good payroll service can be invaluable, particularly in the collection and payment of payroll taxes. Rather than worry about saving the money and making progress payments to federal and state agencies, let the pros do it. Give David M. Green Bookkeeping and Tax Service a call today!!!

5. Get creative with your payroll schedule. Every business owner has a different revenue stream. Retailers and restaurants take in daily revenue. Manufacturers, wholesalers and even health clubs take revenue in on a monthly basis. Most of these businesses need to meet weekly payrolls and solid cash flow planning is required to make sure that the outflow is covered by the cash on hand and the incoming money. This is great for all of those businesses with high frequency of deposits like retailers, but could be a challenge for those with a slower receivables payment stream. Some states permit bi-weekly or bi-monthly payroll, which can be helpful to those businesses, especially when paid on the week before or after rent or other obligations are due. This also cuts down on the frequency of payroll tax deposits, as the payroll periods are spread out.

6. Establish relationships with a reputable credit provider. Planning for a rainy day is a noble cause but unrealistic for many small business owners. One thing I have learned as a one-time small business owner—and now as someone who finances them—is that most cash flow storms come on suddenly and it brings a sense of desperation or lack of control. It happens to most businesses at one time or another. If you work with a quality company that provides working capital, stick with them and build a relationship. If they know you, they will be there to help quickly when you call.

7. Strengthen your relationship with your banker. Your banker may not give you a loan and may not provide you with a line of credit, but they do have a great deal to say if checks bounce or are charged NSF fees and cleared. Communicate with your banker and let them know where you stand and what is happening with your business. They often listen and help.

Managing cash flow has long been, and will long be, a pain point for many small business owners, but it’s possible to bring relief through smart planning and open lines of communication with vendors and financial partners.