What Bills Consumers Pay First
Maintaining a sound financial footing in the midst of our sluggish economy and Congress’ recently passed tax bill can be a real challenge for small business owners, especially during budget planning season.
Highlights of the Tax Hike Prevention Act of 2010:
- Adds $858 billion to the national debt
- Two-year extension of Bush-era tax cuts
- Extends unemployment benefits for 13 months
- Cuts Social Security (payroll tax) 2 percentage points for 12 months
- Restores the estate tax at a lower level
CNNMoney.com goes on to explain how the tax cut deal effects you with some specifics. But what does this mean for small business planning going into 2011? Focusing on certain cash flow management practices can help guide small businesses onto a solid financial and operational footing. Here are three to get you started:
- Have a cash flow management system in place. Begin by having a clear understanding of how cash flow is defined and be sure you’re tracking the right numbers. This article from Inc.com can give you a good start: How Do You Define Cash Flow? An article by Dun & Bradstreet states the average time for a B2B (Business to Business) invoice to be paid is over 50 days. Be sure you have a system in place to speed up profit recovery and keep accounts from going delinquent sooner rather than later. Also, work with your staff to immediately identify problems and reinforce communications with habitually slow paying customers.
- Have controls in place that carefully extend credit. Part of this involves making sure you don’t find yourself in a position of over-dependence on a few higher-paying customers. Be sure to assess the credit risk of all customers, both large and small. Review the 5 steps you can take to ensure sufficient credit controls are in place from the article, How to Assess the Credit Risk of Your Customers. We also published an article you may find helpful: 5 Tips to Protect Your Cash Flow With a Credit Policy.
- Have a staffing plan that reduces pressure and overhead. We all know payroll is a top line item in the overall budget. Be careful to maximize your current staff and consider using outside services during peak times when possible. Look at adding permanent headcount only after a sustained period of growth and productivity.
We hope this gives you some ideas and resources on how to plan for 2011 while keeping in mind that cash is king. Keeping it positive and flowing in these difficult times should be our number one priority.
We’d love to hear your thoughts, ideas and best practice suggestions on cash flow management.
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