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Business + Management: Marty Mcghie

Finding Hidden Cash

Eight suggestions to bolster print-shop cashflow.




Lately, there’s been a considerable amount of press about the economy emerging from the recession. Yes, there are certainly some economic indicators that seem to point that way. Frankly, however, most business managers operating in our industry still believe we will have to manage through several more months of the recession before we see business begin to get back to what we might consider normal.

Hence, we continue to find ourselves in situations where it’s critical to carefully shepherd our businesses. If your company is like mine, you’ve already gone through a round or two (or more) of measures to address the current state of affairs, but you’d still like to see a better cash flow in your operation. Consider, then, the following eight suggestions that might be able to help you find some hidden cash within your company.

Four ways to find cash
Let’s first look at these four options for your shop:

Emphasize collection on accounts receivables: No doubt you have found that during these tough times the old adage “the squeaky wheel gets the grease” is more applicable than ever. Make sure your accounting personnel place a high priority on collecting your cash. Have your accounts-receivable clerk begin making calls to every customer whose account reaches seven to 10 days past due. On larger receivables, make a call around the receivable’s due date to ensure that your invoice is in your customer’s accounting system and then get a payment commitment. Staying on top of your receivables will improve your accounts-receivable turnover and keep cash flowing into your business.

Manage your accounts payables: One effective way you can manage your cash flow is to work with your suppliers and other vendors to stretch out your accounts-payable cycle. For example, if your supplier has terms of net 30, talk to them about extending these out one or two or even three weeks. Let them know that they will be paid, but that you need to extend the payment cycle by a few weeks. The key here, of course, is to work with the supplier and keep communication open. Then, follow through on your commitment once you have agreed upon a plan. Improving your A/R and A/P cash cycles doesn’t increase your net cash, but it certainly helps you manage your business more effectively by managing the timing of your cash flows in and out of the business.

Be tough on expenses: Now is a great time to find some additional areas where expenses can be cut. For instance, this may be a good year to cut back on the amount of money you spend on your company Christmas party. Perhaps you reevaluate how much you spend on Christmas gifts for your customers. Consider the amount of money your sales team spends on entertainment and other customer perks. You probably shouldn’t completely eliminate these expenses—on the contrary, it may in fact, be very important to have a company Christmas party, and you will likely want to send your clients a gift for the holidays. In our current economic situation, however, everyone really expects you to cut back in these areas and no one is going to be offended. It just makes good business sense to save money in some of these discretionary areas.


Focus on profitable sales: Many of us offer our customers a wide variety of services and products. That’s not necessarily a bad thing, but in tough times it can often save you cash if you’re able to focus on the things you do the best. Often, during challenging times, your sales team will have the tendency to take in every job that comes their way, even if it isn’t something that you produce very effectively. Put together a plan with your sales team that focuses on selling your core set of products—the products that make you the most money—and avoid getting involved in jobs where you will struggle to make a profit.

Four more cash finders
And if those four weren’t enough for you, consider the following:

Decrease inventory: Review your inventory balances and look for areas where you can decrease the amount of inventory you carry. To do this, you’ll need to track the inventory turnover on each of your inventory line items. You can’t just do this in a bubble or you will probably end up cutting back on materials that you may be managing just fine (and keeping other materials you should be cutting back on). Just because you carry a large balance of something may not mean that you have to reduce that particular item. You may be utilizing that inventory item often enough to keep the balance right where it is. Often, it’s the medium- and smaller-balance, less-used inventory items that can be managed more efficiently. Once you identify items where you can reduce stock levels, you’ll experience a one-time windfall of cash that will certainly be useful to your business.

Renegotiate debt: Due to the tightness in the credit markets, commercial interest rates are not as low as the typical 30-year residential mortgage rates. However, they may still be better than the current rates on your leases or loans. Talk to your bankers and let them know that you need their help with the possibilities of restructuring your debt. There’s a lot of competition right now in the financial world and, assuming you are a good customer, your banker will be eager to help you out. The best scenario is to reduce monthly payments without extending the terms of the loan, but in some cases, you may choose to extend the length of the loan to save more money on a monthly basis.

Review benefits: By now, you have probably already cut back on some of the benefits offered to your employees. While trimming benefits will have significant and even dramatic effects on your employees, it may be a way to save cash if you find yourself in a desperate situation. Some benefits are more conducive to temporary suspension such as 401k employer matches, long-term and/or short-term disability payments made by the company in behalf of the employees, and others. Health-care premium changes are risky to mess with since that may induce some of your employees to drop their medical coverage. But it may be useful to examine some changes to the coverage that could save both you and your employees some monthly cash. You could also reevaluate the number of paid holidays for your employees. Yes, reducing employee benefits puts you into very sensitive areas for employees, but if they’re on board with the philosophy that you are all trying to do your part to save the business, most employees would rather sacrifice some benefits in the short term to keep their job for the long term.

Avoid layoffs–consider furloughs: Many of us experience cyclical fluctuations in our businesses during the year. As you approach a slow part of your business cycle, you might be considering some layoffs to avoid the high labor costs that accompany the low sales volume. The dilemma is: At this point, you have probably already weeded out your marginal employees in prior workforce reductions and now you’ll lose good employees—employees you will need in a few months when volume jumps back up. My recommendation is to consider furloughs instead of layoffs. That is, shorten your work week down to a 32-hour work week or even lower if necessary. You can do this by reducing your work day down by 1 1/2 hours each day or by rotating your employees around so they each have an extra day off during the week on different days. That way, your shop can remain open all week. In conjunction with the adjustments to your hourly workers, make sure your salaried people participate equally in the same furlough program so that everyone is involved in the cost-saving measure. While this creates challenges with all employees, most will prefer this approach to permanent wage reductions or layoffs.


Survive now, prosper later
In addition to the eight ideas I’ve presented here, there are undoubtedly other areas in your business where you can find hidden cash. Make an effort to find those areas, implement the necessary changes, and figure out a way to survive and even thrive in these difficult times. If you’ve initiated some actions beyond those I’ve cited here to find hidden cash in your operation, I’d like to hear about them; e-mail me at the address in my bio on page one of this column. I believe that most of us will get through these recessionary times and prosper in the future—the trick is to ensure that we survive now and ready ourselves for times ahead.



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