Expense Timing
August 26th, 2010
Copyright © 2010 Integrated Profitability TM
Accelerating the collection of revenue and postponing the paying of expenses have a positive, if temporary, impact on your cash-flow and profitability.
How much can your company affect the timing of expenses?
● Lagging payments
Pay as late as possible without incurring any fees or penalties
● Cash-discounts
When suppliers counter the first tactic above, consider taking advantage of discounts if you pay early; e.g., some jurisdictions offer discounts on property taxes; while some insurance companies tack on a 12% annual interest rate if you choose to pay via installments
● Payment terms
If you can, negotiate payment terms that let you pay bills within 30 (or more) days with no additional fees or finance charges
● Credit card statement cut-off dates
Know the cut-off or close date of your credit cards and, if possible, use the card just after that date and avoid using it during the days just prior to it. Depending on the terms of the card, doing so will give you an extra 30 days or so.
● Tax planning
Usually these provide temporary, one-time benefits. For example, the year I paid my whole property tax before December 31, I had more itemized deductions and, therefore, a lower tax liability. Of course, it was only a one-time timing benefit. Consult your tax accountant on any ideas in this area.
Bottomline:
● Expense timing events are only temporary and one-off
● Expenses that produce high returns are clearly a much better focus of management attention
Bill
William A. Stong
Email: william.a.stong@gmail.com
SBF&P # 77
Telephone: 925-202-6244
Copyright © 2010 Integrated Profitability TM
Got Cash Flow? (Part 1 of 2)
July 9th, 2009
Copyright © 2009 Integrated Profitability TM
Is your company generating Cash Flow or Cash Dribble? Does your Cash Flow look like the Amazon? Or a dry wash?
Excellent Flow
If your business is firing on all cylinders and you are drowning in a flood of positive Cash Flow, then STOP READING! Go straight to your favorite sweet shop and treat yourself to your favorite dessert. Do not stop at the gym, do collect your “2-for-1” coupons. You deserve a reward for your outstanding success.
On the other hand, if your Cash Flow isn’t as much as you would like, or you think it should be more, then read on. If your Cash Flow is negative, then definitely continue reading.
If your business’ Cash Flow is:
● overwhelmingly positive,… why are you reading this? You’re supposed to be enjoying your favorite dessert. Get out of here. Unless you’re reading this over a banana split at Fenton’s or another fine establishment—then you’re off the hook.
● trickling along, then now is the perfect time to take action
No Flow
● negative, then late action is better than no action
And finally, if you don’t know your business’ Cash Flow, then you are starting at Square One; which, if you have been in business for some time, is not a good place to be.
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…”
Subscribe to our blogs using either our 
