Principle # 3 of Good Cashflow Management involves the careful consideration of how you parcel out your money. No, I’m not about to turn you into a tight fisted Scrooge, but some of what I’m about to say will seem like the polar opposite of what I talked about in Part 3, Money In.   Essentially, you want to optimize the cash you have received from your customers by making it work for you.   Here are some tips:

1. Buy on credit.   Theoretically, you should have an account with all your vendors, with terms that allow you to pay for your purchases within 30 days. This leaves the money in your hands a little longer and gives you the chance to sell before you have to pay.   If you are still paying upon purchase, it’s time to have that conversation with your supplier.
2. Negotiate terms.   Will your vendor consider giving you a discount if you pay early?   Even if that discount is only 1%, it can add up quickly to your advantage with a major supplier.   Or, would they be amenable to you stretching your payments out to 45 days without interest charges?   Once again, leaving money a little longer in your hands.
3. Installments.   If what you purchase involves a long-term project or a long manufacturing period, negotiate installments based on definable and measurable results.   A good example might be: 30% upon commencement, 30% at a predetermined half way point, and the balance 30 days after completion.
4. Credit cards.   Will your vendor allow you to pay outstanding bills (over 30 days) by credit card?   Effectively this is extending your payment by another 20 to 30 days.   Bonus for you!   I will add one caveat here, if you are constantly carrying an outstanding balance on your credit card and incurring credit card interest charges, this is not a good idea.
5. Consignment.   A viable option for some retailers.   You have the benefit of the inventory filling your store (and sometimes a lovely display case) and you only have to pay for it when you sell it.   Do be careful what you negotiate for a commission, however.   In my experience 10% rarely covers the overhead and expenses you incur to sell and store the product.
6. Tracking.   Keep a log or enter the bills into your accounting system as soon as they arrive.   Be sure to pay bills when they are due in order to avoid interest charges and take advantage of early discount payments.  

Believe it or not, managing your money going out is easier than coming in.   Most accounting software provides you with reports to do this easily and some even help you to figure out how much money you are retaining by managing it well.   No bah humbug here!

Ms. Andrée Cusson is a Certified Management Accountant (CMA), a Sage 50 Accounting Partner, and Intuitive Consultant.   She provides controllership services; management consulting; strategic alignment; tax planning; Sage 50 (formerly Simply Accounting) turnkey set up; and “work smarter, not harder” strategies and advice.   Her passion for the past 15 years has been to assist entrepreneurs and individuals with fulfilling their financial goals and dreams.   Her practice is based in Oakville, Ontario, Canada