David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, fraud deterrence programs, and forensic accounting services in Philadelphia and the Delaware Valley.
For many small businesses, it’s an ongoing struggle to keep enough cash on hand to finance operations, pay debts, and provide income to the owners. If your company could use some assistance in this area, an experienced forensic accountant in Philadelphia has several strategies to help maximize cash flow.
“Even the most organized and savvy small business owners can experience cash flow problems from time to time, said David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. “There definitely are ways, however, you can squeeze cash out of sales, assets, and even business debts to maximize your available cash.”
Here are some of Anderson’s top cash flow recommendations:
- Get cash up front from customers: Attorneys, consultants, and others do it. You should too, especially if the sale is for services, if you must purchase materials to fulfill the order, or if there is more than a month between the date the customer places an order and the product is delivered or service is completed, said Anderson, a forensic accounting expert in Philadelphia. Depending on the size and type of the order, you should ask for anywhere from 10 percent to 50 percent of the sales price up front, he said.
- Offer customers a discount for faster payment: Many companies offer a one or two percent discount for payment within 10 days of the original invoice. Such an offer, Anderson said, can motivate customers to pay you quickly. Of course, you need to consider the impact of such discounts on your profitability and ensure that your sales price includes the impact of the discounts, he said.
- Accept credit card payments: Some customers may not have adequate cash in their bank account to pay quickly, but they do have business or personal credit cards they can use, said Anderson, a forensic accountant in Philadelphia whose company offers a full range of forensic accounting services in Philadelphia and the Delaware Valley. You’ll pay a small fee of about 3 percent to the credit card company, he said, but you’ll get paid faster by accepting credit card payments.
- Stay on top of your past due accounts: How long do you let a customer’s account go past due before you pursue them for payment? The answer should be not at all, Anderson said. Consider establishing a policy of calling customers five days prior to the due date to remind them that the payment is coming due. And, wait no more than two days past the due date (allowing for the customer to have mailed the payment on the due date) to begin calling the customer, Anderson recommends. Remember, the squeaky wheel gets the oil, he said.
- Consider factoring your accounts receivable: If your industry has payment terms that extend beyond 30 days from the invoice date, or if your sales are for relatively large amounts, consider selling your accounts receivable, or invoices, to a third party. By factoring your accounts receivable, your invoices are paid much faster, said Anderson, a forensic accounting expert in Philadelphia. Remember to consider the cost of factoring and how it impacts upon your profitability, since factors can charge a significant fee, he noted.
- Squeeze more cash out of your inventory: When was the last time you analyzed your inventory to determine if you have too much of certain items, slow-moving items, or obsolete items? Consider discounting these items to turn them into cash. Or, Anderson said, you may prefer to sell slow-moving or obsolete items to liquidators or scrap dealers at drastically reduced prices. Sure, you won’t make much, if any, profit from selling these items (particularly the slow moving or obsolete ones), but they aren’t producing cash if they’re just sitting on the shelf, he said.
- Do the same with your older fixed assets: Most businesses have an inventory of retired fixed assets that aren’t being used and are just taking up space. Consider selling these assets to liquidators or scrap dealers, said Anderson, a forensic accountant in Philadelphia. You’ll free up space and maybe some cash, too.
- Negotiate longer payment terms with vendors: Have you ever had a customer ask to stretch out his or her payment terms? You are a customer, too, Anderson reminds business owners. It never hurts to ask, particularly when you won’t get paid by your own customer for 30 or more days, he said. In that scenario, it’s likely your vendor will understand and allow you to stretch out your payments.
“These are just some of the strategies that you can use to increase your cash flow and make it easier to keep your business going, pay your debts and keep your own income consistent,” said Anderson, a forensic accounting expert in Philadelphia.
If you require the services of a Certified Fraud Examiner or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at firstname.lastname@example.org.
About David Anderson & Associates
David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.