Finding Cash Within Your Business

By Paul Arsenault

We have all experienced cash flow problems in our businesses.

Whether you happen to be a seasoned business owner or a start-up company, the symptoms are often the same. They begin with the company’s inability to meet its everyday financial obligations, they can become as drastic as missing a payroll tax deposit or being put on C.O.D. by your most important suppliers.

Our first inclination when faced with cash flow crunch is to approach the bank for the dreaded “working capital loan.” Those of us who have sat in front of the banker and attempted to explain why we’re having cash flow problems are well aware of the difficulties in obtaining this kind of financing.

What I’d like to recommend is an alternative to a working capital loan. I suggest that you look within the company to find the cash you need. At first this idea may seem strange as your checkbook probably reflects a negative balance.

Instead, let’s try another option. Blow off the dust on your most recent financial statement (ensure it is less than 90 days old for we will need up-to-date information) and examine it.

Several items on your balance sheet can generally be converted into cash within a 30 day period. The first: accounts receivable. Review your accounts receivable list and see how many accounts are past due, when you have determined the amount, pick up the phone and start to work these accounts. When you make your call, be honest with the customer about how important it is for your company to be paid on time. You may be pleasantly surprised at how many small companies have gone through the same cash crunch and may be willing to cut you a check in a matter of days.

Inventory, the next item on your balance sheet needs to be reviewed with great care. Make a detailed list of your inventory and determine which of your existing customers may have an immediate need for any of it, even though some items may be dated. You should contact these customers and offer them this inventory at a discount for cash.

The next item on your balance sheet is your fixed assets including land, buildings, equipment and so on. You’ll need to put together a detailed list of all company assets. Review the list and decide which of the assets the company can do without. These assets can then be sold for cash.

Finally, make a list of all your accounts payable and determine if you can negotiate an extension of terms with any of your vendors. This will free up some cash for other parts of your business. As in dealing with collections, be honest with your vendors and ask them to help you work through your cash shortage.

Remember, good money management includes reviewing and managing your accounts receivable, accounts payable and inventory on a weekly basis. If you use your financial statements to spot trends and manage your business, you will greatly reduce the risk of a cash crunch.