Maximizing Cash Flow

Scott Herckis

A question that I’m often asked is, How do I maximize my cash flow?

There is no one simple answer. Of course it depends on your company’s situation and a multitude of variables will result in different answers. However, the process in order to determine your cash position and maximize your cash flow can be accomplished by doing the following steps:

First, prepare a budget. This can be 1-3 years, but it should be no longer than that. At the very least it should include a balance sheet, income statement, and cash flow statement for each period.

Second, use the budget to compare it to actual results on a monthly and year to date basis. You want to look for significant variances and understand why your actual results are different from your budget.

Third, adapt the budget. It should be updated, ideally each quarter. Because things change in business all the time. An outdated budget doesn’t do you any good.

Fourth, leave room for error as things happen that you don’t expect and trying to plan to the penny is a recipe for disaster.

Finally, plan so you can invest in your business. Whether it’s employees, marketing, or machinery, you will likely need some or all of these items. So ensure you have the financial capability to handle these investments.