WHY KNOWING WAYS TO

IMPROVE YOUR CASH FLOW

POSITION IS SO CRUCIAL

A R E YO U W O N D E R I N G I F YO U H AV E

H I D D E N M O N E Y I N YO U R B U S I N E S S ?

Many times you see reports about the financial gains of Fortune

500 companies and stories of their success.

Yet, you don’t need to be a mega-corporation to collect more cash.

Knowing a few details in your financials can be used to improve cash

flow management for small businesses.

CONTINUED

“Surprisingly, business owners often have the ability to collect a lot

more cash each year, but many don’t realize it because they don’t look

at their financial statements. If they did, they might see several weeks’

worth of sales sitting on the balance sheet in accounts receivable –

the unintended result, perhaps, of a shift in the company’s credit

policies over time or a recent slowdown in collectability.”

(Forbes.com)

CONTINUED

“Another really important metric on financial statements can be

found on the cash flow statement: The line showing cash flow from

operations. Cash from operations identifies how much cash the

business is generating from operations, and the figure can’t be

negative for long or a company is in big trouble. Negative cash flow

from operations is a symptom of problems in the business, so watch

that number carefully.” (Forbes.com)

T O B E M O R E S P E C I F I C , L O O K A T T H I S E X A M P L E

O F A B U S I N E S S T H A T F O U N D C A S H I N W H A T

T H E Y T H O U G H T WA S A P R O F I T A B L E A C C O U N T.

According to an article by Inc.com, a business owner by the name

of Andrew Blitstein, inherited a cleaning service from his father who

had recently passed.

After some time running the business, he was begged by his mom

to seek the advice of a local accounting expert regarding his financial

outlook for the business.

CONTINUED

After several consultations and reviews, they determined that a

couple of his big accounts were deemed to be unprofitable, actually

incurring additional costs to service the account.

By the time we finished, we could see he was losing from $50,000

to $60,000 annually on the account. "Think of it this way," I said. "If

you stopped doing business with this customer today, you'd make an

extra $50,000.” (Inc.com)

CONTINUED

What was determined was instead of pricing his services to justify

a fair wage at $20 per hour, he was actually incurring expenses of $31

per hour, based on additional expenses needed to do the job.

This took some time to figure out, after analyzing all of his

financial statements to determine his pricing structure and how his

jobs were being billed.