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Web Extra: Cash-flow projections the NaturaLawn way

February 15, 2015 -  By

As part of the February 2015 cover story, “5 ways to improve your cash flow,” Phil Catron, president of NaturaLawn of America, shared a few of his tips for improving cash flow. Here, he goes more in depth and offers a cash-flow projection worksheet for LM readers. (Download it HERE.)

Survival precedes success, and the one absolute precondition to the survival of your business is the availability of ready cash when you really need it. Out of cash means you are out of business.

Many small business and most new ones suffer from insufficient cash and capital.

A cash crunch can be a symptom of a deeper problems. Often it’s not simply the consequences of an ailing business, but rather a specific case of inadequate cash management. Cash management means controlling the business’s cash availability, based on an understanding of, and planning for, its timely cash requirements.

Cash management is a do-or-die condition of survival and success in small business.

Six steps to help you understand and plan cash flow include:

  1. Use best estimates. They are absolutely necessary and required.
  1. Be realistic. This will differ for a start-up or fledgling company verses a mature one with history.
  1. Examine your assumptions. Consider the impact of timing on these assumptions.
  1. Consider seasonal factors. Our businesses and the activities we conduct are very much influenced in a seasonal manner and consumer demands, marketing campaign, payroll expenses, etc., are all affected by this.
  1. Remember contingency funds. Murphy’s Law applies here. Have a back-up for six months to two years.
  1. Consider compensation. Don’t count on taking compensation even if it’s plugged into the budget for at least a year, maybe two.

Asset control

There’s an opportunity to provide vital, extra cash in almost every corner of your business.

Cash management inefficiencies can rob your business of 25 percent to 30 percent of the total available cash. Here are four vital areas to concentrate on:

  • Reducing inventory.
  • Accelerating the receivables.
  • Stretching out payables.
  • Preventing theft or fraud.

After you’ve evaluated the above four areas, you’ll certainly be able to come up with many more ways to squeeze additional cash out of your business.

Here are a few to consider:

  • Eliminate prestige and nonproductive frills.
  • Purchase used (not new) equipment and furniture.
  • Transfer idle cash balances to pay down credit line balances.
  • Take advantage of the checking account “float” (remember, transfer money after 2 p.m. on Fridays to pay bills).
  • Tighten up on discount pricing.

As the owner/manager of your small business, you are a jack-of-all-trades. Managing the cash flow of your business is essential to its survival and the responsibility to manage it is yours. It’s one of the few areas in the business that requires the highest priority attention.

About the Author:

Phil Catron is president of NaturaLawn of America, a Frederick, Md.-based franchise system.

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