According to a study published by Forbes, 69% of small business owners are kept up at night with concerns about cash flow. It breaks my heart to hear that high of a number, especially knowing there a few things that can help. Let’s call them “sleep insurance”. 

There are 4 things you really need to know about how to handle changes in cash.

1. Managing receivables: I work with quite a few professional services firms and several have issues with this. One in particular does about $2 million in revenue, which is about $6,000 in sales per day. From time to time, her accounts receivable jump by 15-20 days.  Some of that is due to slow payment by her clients. If you do the math, you’ll see that $6,000/day x 15-20 days is between $90,000 and $120,000 sitting in AR that could be sitting in her bank account. Collecting faster will keep cash higher and receivables lower.
   
   
2. Managing payables: Your receivables are someone else’s payables.  So, the quicker your client can get paid, the faster you’re likely to get paid. There can be a trickle-down effect here. There’s no benefit to paying early unless you negotiate a discount. But pay within terms where possible to maintain a good credit history.

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