Company Cash Flow: It's King in 2011

Here we are again, poised at the start of a new year. Surely, 2011 will be an extraordinary year for American business – one of on-going change and challenge on nearly all fronts – and to survive, print providers must continue to keep a close watch on their bottom line. With credit sure to remain tight for small businesses, cash is still king.

What follows is a collection of useful tips from a trio of shops that participated in an earlier webinar presented by the Signage and Graphics Summit, “Finding Your Company’s Hidden Cash.”

Focus on cash flow
A two-pronged approach to cash management – focusing on cash coming in as well as cash going out – is the key to success in 2011, says Marty McGhie, CFO of Ferrari Color (ferraricolor.com), Salt Lake City.

When it comes to accounts receivable collections communication with your customers is critical. “Everybody is trying to stretch their receivables out, so we begin talking to our customers as soon as the account turns 30 days. We are very firm with them and ask them to set up a plan in terms of when we will get paid.”

The goal is to stay on top of the account, find out when the client is getting paid, then make arrangement for the money to be immediately turned over to his company.
For accounts payable, McGhie works with his vendors to stretch out their payable cycle as much as possible.
“If you sit down with your key vendors and talk to them about where you are and what your plan is, they’ll be able to live by that,” McGhie says. Whether it’s making arrangements to extend the 30 day billing cycle to 45, or stretching it to 60 days or more while you wait to get paid by your own customers, the key is open, honest communication.

Incentivize the sales team
In many cases, engaging the sales team and company executives will speed the accounts receivable collection process. For Bob Kissel, president and CEO of KDM POP Solutions Group (kdmpop.com), setting a benchmark for “days outstanding” on accounts, then tying that benchmark to executive bonus pay helps encourage management-level staff to get involved in the collections game.

“We also provide sales personnel a copy of the aging so they’re aware when their customer is slow paying and they can tell accounts receivable if there is an issue,” Kissel says. “After 90 days, we tend to deduct a percentage of commissions paid to the sales personnel; that way we get more buy-in from the sales department and they’re more aggressive in trying to help collect the outstanding receivable.”

To keep money coming in, his company sometimes asks for payment up front to cover the cost of materials and labor and occasionally accepts credit-card payment, despite the processing fees charged by card companies.

Examine your expenses
For Kim Springer, CFO of Harlan Graphics (harlangraphics.com), keeping a keen eye on bills and expenses is critical to managing cash flow.

“I can quickly run through the invoices that are the same every month, but if I stop to look at them closely, I always find something I can save money on,” she says. “An obvious example of this is the company’s cell-phone bill.”

When renegotiating her company’s cell-phone plan, for example, she examined all the employees’ minutes and found a number of obvious areas where she could cut costs. She also shaved off some monthly expenses by turning a critical eye to the company’s utility bills.

“We pay those without looking too hard at them,” she says. “But lately I’ve been looking at de-regulation and have found that I can save close to 50 percent on my electric bill by changing to another provider.”