Shape up your cash flow

This is the first in a series of “business fitness” posts to help you get your business in shape!

Taking care of the long term health of your business is like taking care of your body.  But for many, it’s like that exercise regimen you keep planning to start.  As an entrepreneur, you’re too busy to step back and look at the health of your company.

Cash flow is a great place to begin.  If you can make payroll and keep on top of your bills, sometimes that seems like enough.  But that’s kind of like saying getting out of bed in the morning is your fitness program.  Wouldn’t it be nice to know you’d have enough cash next month, too?  Here are your first steps to good health.

Step 1: Project

Projecting your cash flow is a simple exercise like preparing a budget.   Start with your annual operating budget.  Identify each month’s anticipated income, and each month’s anticipated expenses.  That’s it!  Quickbooks and other accounting programs have simple cash management tools to help you create these projections based on last year’s actuals, and then adjust.
Step 2: Monitor

If you weighed yourself once a year, could you assume your weight stayed stable?  It’s just as unlikely that your cash flow projections will remain valid if you never check on them.   Update monthly or even weekly for extra peace of mind.

Step 3: Improve

Here are some exercises to consider…

1. Lower your property taxes     If you own real estate, it’s probably worth less this year.  Make the most of it.   Property taxes are based upon valuation done by the county effective January 1.   Proposed property tax bills are issued by the county later in the year — in Miami-Dade and Broward Counties they are mailed in August.  Focus on the assessment.  You can’t control the millage rate of the county’s budget, but you can file a protest and contest the valuation.   You may need a real estate appraiser or a lawyer who specializes in property tax protests to help you file.  Typically these professionals receive a percentage of what they save you, so there’s no out of pocket cost and there’s a potential to achieve some reduction.
2. Re-evaluate insurance.     As business conditions change, so do insurance needs.   You may be over-insured, particularly if you own real estate or other assets that have decreased in value.   Make sure your agent is shopping your insurance on an annual basis.  If cash flow is very tight, you might consider increasing deductibles.   Perhaps most important to cash flow, review the timing of payments.  If you don’t have to pay it all in advance, maybe this is the year to spread out your payments.
3. Review all contracts.      In this competitive market, reviewing any contracts is one way to control expenditures – everyone is looking for new business and willing to price well to get it.  Consider renegotiating contracts, or getting competitive bids.  Make sure you’re getting quality people, not just low pricing.

Don’t procrastinate any longer about getting your business into shape!