If your accounts receivable balances are edging up and getting older and older each month, then it might be a good time to bring out the aging reports.  But what if we looked earlier in the cycle to see what we could do to collect the sales even sooner?  Let’s take a look at five potential changes you can consider making that will speed up your cash flow, reduce aging receivables, and possibly reduce lending costs in your business. 

1.  Get paid in advance. 

Getting paid in advance manifests itself in a number of ways:

• Prepaid gift cards
• Deposits
• Prepayment plans
• Monthly or project retainers

If it’s common to get paid in advance in your industry, then all you need to do is focus on doing more of it.  If it’s not common in your industry, I encourage you to see how you might apply one of these ideas to your industry.  You may be able to invent an entirely new way of doing business within your industry.

2. Increase your cash-equivalent payment choices.

If you’re not already able to take the following forms of payment, then it’s time to sign up for:

• Credit cards, especially MasterCard, Visa, Discover, and American Express
• PayPal
• Wire transfers
• Cloud-based bill payment systems

If you have overseas clients, being able to easily accept wire transfers keeps it simple if the client does not maintain a bank account in your country’s currency.  And although most wire transfers still need to be handled manually, you can systematize and automate the process as much as you can by having written procedures for your clients. 

Offering a cloud-based billing solution such as Bill.com eliminates the physical writing of checks, and you can approve and send payments from anywhere, even if you are on an airplane.  The efficiency cannot be beat. 

It’s surprising how many business-to-business payments come through PayPal, so if you don’t have this one as an option, you might want to consider it. 

3. Streamline your time and billing system.

If you can bill faster, you can collect faster.  Take a look at your processes and identify the bottlenecks in your billing system.  Is it the partner who keeps the invoices on their desk for days before they are approved to be mailed?  Is it an antiquated time system that is not real-time?  Is it duplicate data entry that can be streamlined?  Once you’ve determined your bottlenecks, you can take action to eliminate them.   

4. Implement eCommerce. 

An online shopping cart can help clients serve themselves and cut way down on your customer service.  Today’s online shopping carts can handle one-time payments, recurring payments, and variable bills.  The best of them offer a portal for clients to update their own credit card expiration dates, respond to declined card messages, and basically serve themselves.  It’s quite fun to come into the office each morning and find loads of cash sales already in your cart from the night before, without any help from you or your staff. 

5. Card on file. 

For long-time clients, it makes sense to set up automatic approval on a monthly basis by having their card on file.  Most busy and successful clients will appreciate the time savings when using this method, and you will have more control and be able to get paid faster.  You can also use a hybrid of this method – semi-automatic approval – where a simple email exchange approves the current month’s amount. 

Try one or more of these five tips to speed up your cash flow, simplify collections, and lower the amount you need to borrow from the bank to finance your business.

It’s that time again … time to send your estimated taxes in to Uncle Sam.

So what are estimated taxes and why would you have to pay them? When you bring home a paycheck, your employer has withheld income taxes from your paycheck. But when you’re self-employed, a landlord, or even an investor, you are earning income that has never had taxes withheld. Rather than settling up all at once on April 15th, the government wants you to turn over 25% of your estimated tax liability at four points throughout the year. In fact, you will have to pay an “estimated tax penalty” if you fail to do so and owe Uncle Sam $1,000 or more when you do your taxes in April. So, start making those quarterly estimated tax payments and save yourself from all those nasty penalties!

Need help remembering those due dates? Sign up for my quarterly newsletter here. It comes out just four times a year, just in time to help you remember those quarterly due dates!

The economy is bouncing back … slowly. Sales are picking up … to some degree. So how is your business doing??

Not sure how to answer that question? Maybe you should give your business a weekly accounting checkup. Compare your own results, week to week, to look for signs of improvement or trouble areas that need your attention. What stats should you be checking? Every business is different, but these are a great starting point:

Cash balance: What is your cash balance in your checking account now and do you have enough cash to pay the bills that will be due in the next two weeks? If not, can you expect to collect any receivables in the next couple days? You should project out your cash balance at least one or two weeks to address any possible cash crisis before it hits.

Problems? In the short term, you should cut some expenses or shift some expenses from fixed expenses (the same every month) to variable expenses (those that are lower when your sales are lower, but increase when your sales increase). Any way that you can “ramp down” your expenses during the slow times will help you hold on to the cash that you have. Still looking at a cash crunch in the next two weeks? Explore ways that you can request extended terms from your vendors or look into a line of credit from your local bank or credit union.

Receivables: What payments do your clients owe you and are any of them late? If so, how late are they??

Problems? A friendly note may be all that’s needed to shake loose some of those payments. Instituting a finance charge on overdue invoices might give others the incentive they need to pay your invoice. In the near future, you might want to consider running credit checks on new clients to weed out those with poor repayment records. Another option is to establish more-aggressive payment terms or a substantial downpayment and payment before final delivery.

Sales: Are you on target against your projections?

Problems? What is the reason for the drop in sales and what can you do about it? A small investment in a marketing coach might help you rethink your approach to landing new clients.

Billable time: Do you have enough time to produce the work that you’ve already sold? What jobs are going to have deadlines in the next two weeks and are you going to meet them?

Problems? You may to need to bring in subcontractors or some administrative assistance to meet deadlines. Is that in the budget? Figuring that out now, before the crisis hits, might mean the difference between a happy customer and an ex-customer.

If you can’t make your books balance, you take however much they’re off by and enter it under the heading ESP, which stands for Error Some Place.

Sam Walton, 1918 – 1992

SmartMoney recently listed a Top 10 list of Bookkeeping Mistakes to Avoid.  Among them are:

• Forgetting to track reimbursable expenses — All those little cash receipts for postage, parking, tolls and office supplies really add up.  If you don’t keep track of them, there’s no way you’re going to be able to deduct those expenses, or be reimbursed.
• Not reconciling the books with the bank statement each month — Reconciling isn’t sexy, like sales and marketing.  But it still needs to be done!  How else are you going catch errors and make sure you know your bank balance?
• Doing it yourself — Most small business owners simply hate bookkeeping.  Hey, if it’s not your cup of tea, outsource it! Having a competent, qualified bookkeeper can get the job done quickly and efficiently.  This will also provide you with a second set of eyes to catch errors such as invoices you forgot to send!

Find the rest of the list at http://www.smsmallbiz.com/taxes/Top_10_Bookkeeping_Mistakes_by_Small_Businesses.html