The Blog

The KEEP Series™

Huge problem facing most businesses? Routinely falling into a cash crunch.

The good news is it’s easily avoidable.

Here are 11 ways to turn your cash-hog company into a profit fountain: 

First, understand the basic principle:

The less time it takes to convert resources to cash, the healthier the business.

Not only does that mean the business is easier to run, but buyers will pay a premium for businesses with great cash conversion.

Here’s how to do it: 

#1 Shorten sales cycle

The longer your sales cycle, the longer between spending $ and resources on generating the lead and collecting cash 

#2 Reduce inventory

Inventory is money tied up in “stuff”. When you see inventory, see dollars trapped, yearning to be free. Reduce inventory and decrease cash you have tied up. 

#3 Right-Size Delivery Staff

If you have a service business, think of delivery staff as inventory. Right size your delivery staff for the forecasted jobs. You’ll never get it 100% right, but too many mouths to feed and not enough paying work isn’t good for anyone. 

#4 Reduce delivery cycle

Longer delivery cycles tie up resources that could be servicing new customers (and generating cash). If you’re only getting paid after delivery, then a long cycle is between you and cash collected. 

#5 Collect up front

The most obvious one here. If you can, collect up front and your cash position is immediately better. 

#6 Invoice promptly

Way too many businesses end up invoicing 60 or 90 days later than they could. Combine that with a net 30 invoice, and customers getting a 30-60 day grace period after that, and you’re getting paid in half a year(!) 

#7 Don’t Extend Terms

So about that net 30. If you can’t collect up front, why not net 15? Tell your customers: you’re not a bank. You’re in the business of providing X, not lending money. 

#8 Stretch AP

On the other hand, get super long terms for vendors you pay. The longer you hold onto cash before it goes out the door, the better your cash position will be. Get long terms, pay just down payments, etc. Do exactly the opposite for your vendors as you’re doing. 

#9 Lease, Don’t Buy

Unless something is mission critical, consider leasing it. Just like inventory, that truck, machine, or whatever is just a chunk of depreciating cash… Which could be better deployed elsewhere 

#10 Outsource

If it’s not core to your business, consider outsourcing it – and get a rock solid Service Level Agreement. Let a specialized company focus on efficiencies that aren’t core to your business. Oh, and stretch their payments too. 

#11 Consider Factoring

Invoice factoring is selling accounts receivable invoices at a discount in exchange for immediate cash. It’s not for everyone, but sometimes it’s a great bridge as you work on your cash cycle 

Doing the 11 steps above can more than double cash on hand.

Discover a weekly list of short, actionable steps to get out of operational deadlock, build a self-managing team, grow strategically, and increase company value in the Boardroom Bulletin™.

Raj discusses what “tax optimization” is and how looking at things differently can drastically reduce the tax bill for business owners.

Discovering a Tax Offset Year can give you opportunities for strategic tax planning that you wouldn’t have if you did things the way most CPAs suggest.

Using corporate structuring properly allows business owners to legally shift their tax obligation to lower-tax entities. Here’s where you can begin.

This little-known strategy can both protect your company from lawsuits and also lower your tax rate (in some cases, to close to nothing). What is it? A unique combination of corporate structuring and intellectual property licensing… That any company can use.

Debt isn’t a bad thing – in fact, it can be a great thing. Using debt the right way a business owner can lower the tax bill substantially.

Choosing the right legal entity can be used to reduce taxes considerably. And no, the answer probably isn’t an S-Corp.

Most business owners don’t know that they can actually invest dollars in reducing taxes. What’s more, the government encourages it. Here’s what you need to know.

Scroll to Top