Essential to keeping any business not just afloat but healthy for the long term is the ability to generate and maintain positive cash flow—an indicator of a company’s overall financial stability and performance. It takes a combination of sound financial planning, savvy resource allocation, and perceptive financial analysis to measure the movement of money into and out of your business to ensure that, at the end of the month, you have the funds on hand to pay your employees, your creditors, benefits, rent, taxes, advertising, supplies, and other expenses. Unfortunately, cash flow “vampires” can be attached to myriad arteries in your financial network, making small yet constant drains on your cash flow that can add up to a significant burden that weakens the overall health of your organization. Let’s look at some of these drains to pinpoint where you can staunch those unnecessary spends and maximize your cash flow:
- Mis-timed payments – If you miss a payment deadline by a single day, the late fee is substantial. Consider setting up an automatic payment structure and review it periodically to ensure you’re never delinquent in terms of amount or date due. At the same time, make payments on or very near the last day they’re due so that you can keep your cash flow flowing for the duration. For vendors that don’t charge a penalty for late payments, extend your pay cycle to 45-60 days after invoice receipt. Just make sure you don’t jeopardize your good credit rating or your good relationship with the vendors you rely on most.
- Recurrent charges –Recurrent charges are sneaky; they’re fairly small amounts, innocuous in appearance, and may be difficult to trace and cancel. Yet together they can add up to hundreds of dollars each month that could otherwise support your cash flow. Charges for everything from newspapers to music subscriptions, online file sharing service providers, bathroom supplies, coffee supplies, and more, may be recurring month after month. If you are using the products or services, fine—but if not, it’s money diverted from your bottom line. The problem is so prolific that there’s now an online service to help you easily cancel the charges that don’t make sense anymore, yet continue to linger. Called “Trim,” the service uses AI to look for and cancel old subscriptions (with your approval) and can even automatically negotiate lower rates for things like your cable bill. More complex capabilities are planned down the line to get people “closer to the goal of 100% financial health,” according to the company.
- Credit card charges – Before paying a bill, review statements carefully to ensure every item was actually ordered and received by your company. Make sure payments are made on time to avoid double-digit late fees that sap your capital. Even better, pay card charges before interest is added to the account. Get the most out of credit cards by using those that offer valuable miles or points for hotels, meals, and airline travel, freeing up yet more company cash.
- Pitch the plastic (sometimes) – When making small purchases, pay with cash if you can negotiate a discount with the seller as you’re saving him the credit card processing fee. Again, savings for you means more cash flow for your company.
- Redundant subscriptions –Rather than order multiples of the same business or industry magazines and journals, first determine who is really reading them…then analyze which one(s) are the most beneficial. Keep the top two, and cancel the remaining subscriptions. This goes for online subscriptions as well. This tactic alone can restore hundreds to your monthly cash flow.
- Silent service fees – Banks often waive fees for certain accounts as long as they meet certain criteria, whether it’s maintaining a minimum balance, posting a certain number of transactions each month, etc. If you fail to meet all of the criteria, the bank won’t notify you—they’ll just quietly add a service fee or penalty to your statement. Month after month, these fees can nibble away at your cash flow. Examine and reconcile your statements carefully, as frequently as once a week if you have a large number of transactions but at least once or twice a month. Make sure you are aware of all requirements to ensure that you aren’t unknowingly paying silent service fees.
Just like the Grand Canyon was formed by a small but steady drip of water, cash flow vampires can combine to erode any business’ financial health and do a surprising amount of damage over time. Scrutinize every line in every statement to pinpoint where your money is needlessly escaping and be quick to eliminate every extraneous expenditure—you may find you’ve added hundreds of dollars or more to your monthly cash flow.