IRVINE, Calif., May 19, 2011 /PRNewswire/ -- A familiar business scenario -sales are increasing, yet the cash availability shows no change or even decreases, and you find yourself wondering where's the cash?
"As you respond to greater demand, you need more inventory, more labor, and more overhead to produce, putting greater demand on your cash requirements," explains Donald Todrin, author of Successfully Navigating the Downturn and president of Second Wind Consultants, Inc., www.secondwindconsultants.com, a business debt solutions firm. "It seems like a good problem as greater sales should mean greater cash return, yet you find yourself broke and in trouble."
If you're coming up short on your search for cash, Todrin suggests checking the following hiding spots.
Accounts receivable
You may sell today and ship in a week, yet receive your payment in 30, 60, or even 90 days, causing you to invest in greater production with yesterday's money. Therefore, you don't receive the cash from your sales until much later, creating huge pressure on your current cash flow. Todrin suggests solving this by tightening your payment and collection terms.
Inventory
Many small businesses have too much inventory and thus have too much money locked up. "Learn to limit inventory and turn it more frequently," recommends Todrin. "Liquidate excess inventory even at a loss, get your cash out so you can use it."
Productivity
The current reality of your productivity may differ from what you estimated long ago. Todrin urges you to figure your real-time productivity and make certain you are delivering as you computed. If not, then it's likely you are under pricing your products or over spending on production.
Profitability
Have you really figured what your profit margins are? With ever-increasing overhead and payroll and increasing costs of goods, your profits may be dwindling and on top of this, if you are discounting, you may be giving your profits away.
High Overhead
"Negotiate, change vendors, reduce overhead, and have more cash available for more important income producing activity," says Todrin.
Donald Todrin, www.dontodrin.com, has more than 30 years of experience solving difficult business problems and building profitable business organizations.
Successfully Navigating the Downturn
Entrepreneur Press - $19.95
ISBN 13: 978-1-599184-197
ISBN 10: 1-599184-192
SOURCE Entrepreneur Press
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