How to convert sales to cash faster

Money, money, everywhere, but not a coin to bank—at least that is what it seems to small business owners duringcash flow hard economic times. “You do have money. However, your money is in accounts receivable,” Brian Barquilla, president of Barquilla Consulting and publisher of Jacksonville Advantage, told a group of small business owners in the October Knowledge Is Power workshop. Barquilla moderated a panel discussion that also included David Marovich of Florida Telco Credit Union, Chad Todd of AR Funding, and Cathy Bracken of Cyberauthorize.

Increasingly, customers are treating small businesses—in fact, all businesses—as if they were a bank. When customers delay paying, they are using your money—for free. But your business is not a bank, said Barquilla, and you need to get your accounts receivables converted to cash. It’s a challenge, he admitted: The entire payables cycle has been pushed from 30 days to 45 or 60 days or more.

Barquilla pointed out four main areas that small businesses can control to improve their financial outlook: expenses, productivity, purchasing, and collections.

“The name of the game is converting sales into cash—as fast and as easily as you can,” said Barquilla. He also reminded the group that the conversion process has a cost associated with it. “If you are paying your bookkeeper to call customers, you pay for that time. Even if you make the calls yourself, it is costing you. Time is money. Don’t let debt get a day past 30 days.”

Relationships for improving cash flow

In addition to these four areas, Barquilla emphasized the need to demand more from your business-support team—your banker, attorney, CPA, and other key support suppliers. “Your relationship should be such that you have them on your speed dial,” said Barquilla. “You want to be able to call them and ask them quick questions without being worried about being billed for every second. You want a relationship with your support staff so they can grow with you as you grow.”

“The bank should work for you; make your relationship active,” said Marovich of Florida Telco. “You should develop the relationship to the point that you can call your banker directly,” he said. “What you want is to have a bank that will be with you in good times as well as bad and help you through the bad times by deferring payments and modifying loans if necessary.”

Developing that relationship starts at the onset, when you hire the banker. “Interview your banker as if you were hiring an employee,” said Marovich. “Consider how you relate to the individual. Remember that you are the driver; the banker should not talk down to you.” And, once you hire the banker, set expectations about how the two of you should communicate—in person, by phone, or by e-mail.

A merchant services provider falls into the category of “other key supplier relationships.” “A merchant service provider can improve cash flow regardless of the size of your business,” said Bracken of Cyberauthorize. It can set up your business to accept different forms of payment in addition to cash. The easier you make it for customers to pay you, she said, the faster you can get paid.”

For instance, many companies are controlling costs by providing employees with purchasing cards, but you have to be set up to accept purchasing cards in your business to take advantage of this way to get paid instantly (no purchase order or invoice). Also, she said, businesses should be set up to process charge cards in the most cost effective manner.

Another key supplier relationship you may want to consider establishing to improve your cash flow is with an accounts receivable (AR) funding provider. This type of lender finances your invoices, explained Todd of AR Funding. “AR funding is one of the oldest forms of financing,” he said, advising small businesses to visit their banks first. When a business uses a receivables company, he said, it takes invoices to the company, who then gives them the amount of the invoice less a fee. The benefit is that the business gets its money right away.

AR funding companies are not collection agencies, he stressed. “We lend money to businesses to improve cash flow. We help fund your business.”

Brian Barquilla is publisher is Jacksonville Advantage and facilitates Executive Advantage, a group of professional- and business-development group for Jacksonville-area CEOs. Chad Todd is with AR Funding (, and Cathy Bracken is owner of Cyberauthorize (




More tips on improving your cash flow

• Talk to your banker early—before you run out of cash. Watch your financials carefully. If you anticipate problems, go to the bank early.

• Hire a part-time CFO consultant. Even though your business may not be big enough to have a full-time chief financial officer, consider hiring a part-time CFO or ask your CPA to consult with you in this manner.

• Renegotiate the terms of your lease. But do it early. Because of increasing vacancies, landlords may be willing to drop the cost of rent (or even give free rent for a period of time) in return for an extended lease. However, tenants should not wait until the end of the lease to ask for more lenient terms.

• Change your AR terms. Instead of 30 days, change it to 15 days. Spell out the terms so that the payment period does not begin again if you send a second invoice.

• Know the bureaucracy of your customer. Make sure you send your invoices to the right person. When you call to follow up, make detailed notes concerning the name of the person you spoke with, the time, the date, and the result of the conversation so you can make specific reference to the conversation, such as “When I spoke with you on Tuesday, Oct. 6, at 9:30 a.m., you said the check was to be cut on Oct. 9.”

• Offer a discount to get paid faster. A discount means less cash, but it also means getting cash into your account.

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