Five Ways Entrepreneurs Can Increase Cash Flow

by Randal Pinkett, PhD


Cash flow is the number one headache for entrepreneurs. If more money is flowing out of your company than is flowing in, you could take a loan to temporarily correct the problem. But since borrowing can dig your enterprise into a deep hole, I would urge you to apply the remedies listed below. They will help you address the underlying problems instead of avoiding them:

Collect money up front. Depending on your industry, it might be customary for you to deliver your goods or services without being paid up front. But why shouldn’t you secure money from clients ahead of time, by asking for a third or a half of the total amount due upon signing an agreement? You can receive the balance upon delivery, because it pays to get as much as you can up front.

Collect accounts receivable. The most effective way to get paid is to keep track of what you are owed, without allowing invoices to get “stale.” Also remind customers of what they owe you and print the words “Remit in 30 Days” or, “Due Upon Receipt” on the invoices you send. And remember that because companies go out of business, getting paid promptly is sometimes the only way you can be assured of getting paid at all.

Stretch out the amount of time you have to pay your vendors. To avoid having to negotiate a timetable on every invoice, establish trade credit accounts with your vendors so you can repay an agreed-upon minimum amount each month.

Liquidate inventory. If you are in a cash flow crunch, liquidating or returning inventory or assets can raise cash quickly. I know one company that generated money quickly by selling a batch of slow-moving products on eBay.

Retain cash. Capture some of the cash that flows through your organization. Set it aside for those “rainy days” and you may never have to endure another cash flow crunch again.
Randal Pinkett, PhD, outlasted 17 other candidates to win NBC's acclaimed reality TV show The Apprentice. In addition, Pinkett owns BCT Partners, a multi-million dollar business that he started with several college friends while at Rutgers University. After graduating from Rutgers as a star athlete who also maintained a 3.9 grade point average, he went on to become a Rhodes Scholar and earn four more degrees, including a PhD. from MIT. Thanks to his academic savvy and his profitable campus-born business, Randal managed to graduate from college completely debt free – a rare feat for most college students.
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Posted on June 7 2007 at 7:02 AM
Category: Entrepreneurship
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Posted by member1600131 on 06/07/2007 11:33 AM
Hi Randal,
Thanks for posting five ways for increasing cash flow. If you have sustainable cash flow thats fine, but if you are in cash crunch, then you need to find ways.
I would suggest few for those who are in cash crunch.
1. Most of the bosses, they take salary first. Pay yourself last after paying all other expenses,
2. Body shop your employees to another company for short term,
3. Outsource jobs to others,
3. Use part-time support staff,
4. Have a cost cutting brainstorming session with your partners and also employees
5. Broaden staff responsibilities.

There many be many other way outs but I have practiced above Five many times and it woks.

Rajesh Shakya
http://www.rajeshshakya.com
Posted by Business 2000 Foundation on 06/07/2007 9:35 PM
To be creative and find solutions. A lot of ways to increase cash-flow.

Strategy and the game plan.
Posted by Veronica DaMetz on 06/08/2007 4:01 AM
Mr. Pinkett,

Please pardon my post respectfully, due to a request of Business Foundations, I have been unformally compeld into posting a comment on this article.


"Collect money up front." True

"Collect accounts receivable". True.

"Liquidate inventory." True.

"Retain cash"Collect money up front. True.


"Stretch out the amount of time you have to pay your vendors. To avoid having to negotiate a timetable on every invoice, establish trade credit accounts with your vendors so you can repay an agreed-upon minimum amount each month." I dont agree with this, if people take this fine thats there business.


But anyway back to Business Foundations, I agree with the 5 ways entre. can increase cash, but it is sort of elementary school accounting 101... could you offer more explicit forms of raising cash for R&D, and or marketing expantion. Something more conceptial than tangible?