To keep our cash flow in the black, we’ll take a look at how the following strategies can impact the cash flow statement:

1. Payables and missing discounts
2. Managing aging receivables
3. Commingling funds

Let’s examine these strategies further:

1. Payables and missing discounts

Juggling payables and missing discounts could be helpful to your cash flow statement if you have a lack of working capital.

When purchasing supplies from your vendors, you should always check if there are quantity discounts available based on your spending. If you notice that one of your pending payables is almost at a discount threshold, it’s always worth it to bump the payable up in order to reach the discount level.

For example, you need to increase your spending from 90k to 100k to receive a 15% discount, you’re both getting more product and saving 5k. Sometimes, it pays to spend more 😉

Here’s what that math looks like:

Original spend = $90,000 with $90,000 of goods received.

15% discount once $100,000 threshold spent

New spend = $100,000 * 0.85 = $85,000 spent with $100,000 value of goods received.  

Make sure to go over all your vendor statements and special programs in order to save as much as possible to increase your cash flow (within your limits).

2. Managing aging receivables

Aging receivables is a way accountants will evaluate the accounts receivables of a company to identify irregularities. Receivables are categorized based on how long an invoice has been due. What this does is determines which customers to send to collections versus which ones to follow up on invoices.

Not only can this strategy improve your cash flow by collecting accounts receivable that are past due or coming up, but it is also a great risk management technique. By sorting invoices by 30, 31-60, 61-90, and past-due we are able to determine the financial health of the company.

It is possible you’re taking on more credit risk than you can handle. If this risk is mitigated, your cash flow will improve!

3. Commingling funds

You may think that commingling funds would contribute positively to the overall cash flow of the business. But what it really does is negatively impact the business owners’ cash flow while putting the business at greater risk.

Commingling personal and business funds, or even different business accounts, just muddles the accounting statements and does not provide an accurate picture of the overall health of the business.

If you’ve ever taken money from the business to pay for personal expenses (or vice versa) or only use one bank account for both business and personal needs, you’re participating in commingling and need to stop.

Not only is this activity illegal, but it also makes it difficult to pay taxes, determine the health of the business, puts your business at risk, and will wind up costing you money.

Keep your accounts separate and follow our other tips to improve your cash flow in legal and ethical ways.