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  • Pam Prior

3-Steps to Finding Cash in the Money You OWE

I’m the CFO that 6- and 7-figure entrepreneurs call when they want to get to the next level in their businesses; and I help them get there by focusing on cash flow.  By that I mean providing clear visibility into the next weeks and months of bank balances so that business owners can make intelligent decisions right now.

One of the ways I do this is by looking at how you pay your bills.  Sitting there right now inside the money you owe your vendors is cash you can actually keep in your business longer than you may think without damaging your relationship with them.

Here are 3 steps that I suggest you take today to see what’s hiding here for you:

  1. Look at the largest of expenses you have in your business. Make a list of how you pay each one (ACH (electronic bank transfer), bank account, check, credit card, etc.)

  2. Now – dial in on the ones you pay by check or ACH (electronic bank transfer) or bill pay.

  3. Check each bill and make note of the actual due date.

  4. Don’t pay the bill until it’s due. I know this sounds like it should be obvious – but read the story below to learn that it’s really NOT as obvious as you may think!

  5. Now it’s time to focus on those Credit cards. For each credit card you use in your business:

  6. Check out the billing cycle. In other words: What is the date that the credit card statement cuts off during the month?

  7. Now go back to that list of expenses from step 1, identify any that are due within the next 5-10 days after this credit card’s statement closing date

  8. Pay those expenses on this card and it will give you between 35-60 more days with your cash the first time you do it. (It puts off actually paying your cash for that bill until you have to pay the next credit card statement.)

Here’s a Bonus Step

Since you’re going through this process anyway – it’s time to think creatively while you have all of this information in front of you. Which of your business expenses do you really not need anymore?  It’s time to ditch them. We all have redundant services that build up in all of these monthly memberships that are out there. Do a good house-cleaning on this quarterly, and you’ll be surprised at how much money shows up in your bank account.

Now – back to that story about paying bills too fast – here it is:

I worked with a company that insisted on paying bills as soon as they crossed their desk.  Two things were happening here – the person responsible for putting the bills in the system thought she was doing the right thing to get them processed as quickly as possible. It was her job to clear her desk, and paying the bills cleared her desk.  In addition, the owner was concerned about maintaining the company’s great reputation and as a result encouraged this quick-pay process.

In effect, they paid bills early, not just for discounts, but just to keep a desk clean. That’s an expensive janitor!

They were coming up on a slow revenue period (we saw that in the forecast we did for them) in about two months, so rather than extending on their line of credit, I suggested that they look at their vendor bills and only pay them when they were due; in other words, on time, (not late or early) for the next two months.

Are you sitting down?

We were able to pull $35,000 into the business early enough to bridge the slow time without having to borrow any money!

We proved this owner was lending her vendors her cash at 0% interest by paying her bills so early.

So dive in! Take a look into your expenses and figure out how to get that interest-free loan back from your vendors without hurting any great relationships. There is no reason to give them your money for free.

Author, Virtual CFO, and Finance Coach

"Your First CFO: The Accounting Cure for Small Business Owners" on AMAZON.

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