4 Tips To Manage Home Business Cash Flow Effectively (Part 2)

1. GET AN ACCOUNT ANALYSIS STATEMENT
How do you know how much money (bankers refer to this as "balances") to leave in your checking account to pay for bank's services? That's a question that more business owners should be asking themselves.
(1) First, get a price list which shows how much your bank charges for services like account maintenance, checks deposited, checks paid, stop payments and wire transfers.
(2) Ask the bank to send you a monthly "Account Analysis Statement."  The analysis statement contains the average balance levels for the month -- both the ledger and the available balance -- as well as a listing of
services used, their transaction volumes and cost. This statement should be obtained in addition to the regular monthly bank statement.
(3) Look at the account analysis to see whether you are overcompensating the bank. Then pull out any excess funds and invest them in a high-yielding money market mutual fund, for example. A word of advice:  Smaller banks may not know what you are talking about when you ask for an account analysis.  Larger banks often offer such a statement, but you have to ask for it. And don't let them charge you for this kind of statement since it is only an invoice.

2. INVENTORY IS NOT CASH
Every item you have sitting on your shelf should eventually be transformed into cash in your bank account, and the sooner the better. As long as it's inventory, it's basically dead weight.  If it is not moving, you're not having cash flow. Here are six recommendations to minimize the cost of your inventory:
(1) Attempt to forecast as accurately as you can the day, week and month what you expect to sell.
(2) If you are dealing in more than one item, determine which item accounts for 80% of your sales.  Then minimize ordering other items that are selling poorly or infrequently.
(3) Determine how fast you can get inventory, once you order it.  Try to order as late as you can.  Some firms can use "just-in-time" inventory which enables them to receive their order the day they need it.
(4) Determine your economic order quantity and don't order too much inventory just to save a few pennies.
(5) Shop around and make sure you are getting competitive prices.
(6) Develop a policy for determining what is obsolete inventory, and how you can get rid of it. The best way to get rid of dead inventory is to sell it whatever you can get for it, even if that's only 10 percent of what you paid for it.  At least it will generate cash flow.

3. DON'T FORGET CONTINUITY SALES
Once of the most exceptional ways of controlling and improving cash flow well into the future is by employing something called continuity of sales or services. Continuity sales are simply a contract to purchase products or services on an installment basis for a fixed period of time. That may sound complicated, but in practice, it actually is not. The best example of a continuity sale is a magazine subscription. 12, 24, or 36 issues delivered each month for X amount of dollars. The bigger the subscription, they better deal you get. The publisher gets more money up front, and the customer gets a better deal in the long run. Continuity can apply to anything. Let's say you own a dry cleaning business.  How about an annual deal to clean 5 shirts or blouses per week for set amount  of money?  Get people to pay your for the entire week up front for a lot of fast cash flow. You'll trade a discount for getting business, but you'll ensure a steady cash flow for months to come. Continuity works with just about any kind of product or service you are offering, from dry cleaning to to your personal consulting service. You can structure payments for continuity sales on almost any basis, but it's best by far to go for complete payment up front. After all, the discount is based on a customer's commitment, and they'll be a lot more committed with their money on the line.

4. LICENSING AGREEMENTS
After all is said and done, if you were to list the assets of the company you have created, you'd probably include your inventory, equipment, accounts receivable, equity, and so on. But by this time, especially if you have been reading carefully, you have something more -- something that is not necessarily a physical "thing" such as cash or inventory. If you've been a clever business person, you have come up with certain ads that have out pulled your competitors.  You have developed policies and procedures that have kept your returns and refunds the lowest of any around.  Or you may have come up with a money-making technique that is completely unique.  If so, you are potentially sitting on fast source of cash. You can license the rights to use any of your specialized techniques or assets to other non-competitive businesses. You can do it for a flat fee, a percentage of profits, on a royalty basis, or any other way that makes sense to you.   You can also conduct seminars to teach your techniques to other would-be work-at-home entrepreneurs and charge whatever the market will bear. It's easy to generate an extra $5,000 a month and much more on the lecture circuit. While you are getting paid to spread your knowledge, you will be drumming up more business. The knowledge you have in your head right now could very well be worth a lot of money. It's only a matter of you looking within yourself and a your successes to see how you can transform it all into real, hard cash. All the best.

Read Part 1 Here.