Cash Flow: Revenue (Grey Area)
June 29th, 2009
Copyright © 2009 Integrated Profitability TM
In “Cash Flow: Revenue (Timing),” we covered ideas on how to improve revenue by making changes in the timing of the receipt of cash. The last example in that article, about influencing the type of payment mode customers use when making purchases, was crossing the line from temporary timing changes into permanent cash flow improvements.
There is a grey area between “Timing” and “Actual” ideas when it comes to improving Cash Flow.
For example, if credit cards cost 5% on average to convert a sale into cash, you might consider offering a discount if the sale is paid for in cash. In this example, a 2% discount would provide a good benefit. Some businesses already do this. Traveling around the country, there are gas stations that differentiate prices based on whether one is paying with cash or with credit. As far as your business is concerned, it all depends on the paying-willingness and flexibility of your unique customer base. How to go about it?
In the News: Cash Flow
June 25th, 2009
Copyright © 2009 Integrated Profitability TM
Apparently, Cash Flow is an important topic for just about every type of organization. Including the government of our fair State of California. The lead headline in yesterday’s Contra Costa Times was about the current state budget crisis: “In state senate, it’s high noon.” (Note: the Contra Costa Times website has a different title for this article: “Democrat lays down gauntlet: vote for cuts”)
On Monday in “Cash Flow: Revenue (Timing),” the current series of the Small Business Finance & Profitability blog started on ideas for improving cash flow from the revenue side of the equation. The State of California is right there:
“Democrats have proposed about $9.8 billion in one-time revenues such as accelerating withholdings on personal, corporate and independent contractors’ earnings,…”
Sound familiar? It should. It’s a revenue timing move. As pointed out in Monday’s article, timing only temporarily helps cash flow. This proposal (which didn’t exactly sail through the legislature) doesn’t change the amount of revenue that is owed to California or how much the State is going to end up collecting for the year, but it does cause taxpayers to pay earlier. Which helps California’s cash flow as soon as the higher withholding goes into effect.
However, because it doesn’t really increase state revenue, I disagree with labeling this move a proposal of “…one-time revenues…”
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