Jump to Main Content
USA flagAn Official Website of the United States Government

Cash Flow Management

SBA Learning Center

SBA's Online Business Chat

A live Q&A session with small business experts. Submit your question before or during the chat discussion. You cannot submit question after Closing Remarks for the chat. No registration is needed for the web chat.

Expert: Julie Brander
Cash Flow Management

Julie Brander

Past Chapter Chair, SCORE New Haven

Thursday, September 30, 2010 5:00 PM

 As a mentor and motivational speaker, Julie Brander helps small business owners and entrepreneurs realize their visions of owning a business. Brander has been a SCORE volunteer since 1997, and has 20 years of experience in business, having started a manufacturing, wholesale and retail jewelry company. After selling her business, she became a dedicated advocate and experienced resource for small business owners seeking advice and encouragement. As the past chapter chair of SCORE New Haven, she facilitated and organized small business workshops, seminars and conferences.

Brander holds an MBA and is a licensed Realtor in Connecticut, specializing in investment and commercial real estate. Brander also teaches business basics to entrepreneurs on a college level, and founded the nonprofit organization THIS CLOSE for Cancer Research.

Cash flow is the lifeblood of a business and critical in its growth. Small businesses are hugely dependent on their cash flow, and must either cut costs or scramble to find alternative funding when they are not being paid on time. With money tight and bank loans hard to get, a cash-strapped company can easily be pushed to the brink.

Here, chat participants can get answers their questions about how to plan and prepare for the future, and for changes in the market. Brander will offer tips and advice on effective cash flow management for your business.

Tips on How to Manage Cash Flow

Your cash flow is the single most important aspect of your business. Understanding cash flow focuses on the cash going in and out of your business:

1. How much money did the business receive from sales?
2. Accounts payable are all the expenses that the business has to pay.
3. Accounts receivable is all the money owed to you from customers.

Cash flow problems to BE AWARE OF:

1. Too many receivables (people who owe you money). Banks will look at receivables over 90 days as a bad debt. In some cases, if someone does not pay within 90 days you may never get paid.
2. Too much inventory (cash tied up in inventory for too long). Inventory should be turned over at least 5 times a year to maximize profit. Think about all the different ways to sell products and services. Items that have not sold could be discounted to create cash flow to purchase other best selling items.
3. High overhead costs. Always be aware of all the money being spent and consider ways to reduce costs. Always know where the money is going. This can affect your profit margins. Low profit margins mean that the prices are too low and the costs are too high.

The goal is always to make a profit and enough profit to cover all costs and to continue growth in the business to create success for many years to come!

Note: There is not an audio format for the online chat, and no broadcast capability. SBA moderators retain editorial control over the online discussions and choose the most relevant questions for chat participants and hosts. Chat hosts may decline to answer questions

Chat Transcript

From : Paul
Location : Brooklyn , New York
Question :
I am a new business owner, Where do I get start-up money for the business? And Fast?

 

Reply :
Paul, The easiest and fastest way to get money is from family and friends. For traditional lenders and investors, you will need a business plan. Which is a formal professional well-written plan that is easy to read. Your goal is to persuade lenders or investors to loan you money, you will need to have financial data that shows profitability and the ability to pay back the loan and all the supporting documents and information about the business and the industry. For an outline on how to write a business plan www.score.org, www.sba.gov or www.bplans.com
From : Ed Piekarz
Location : Nokomis , Florida
Question :
Would you recommed that a start-up venture in the early stages do a Cash Flow Chart and why?

 

Reply :
Would you recommend a start up venture to do a cash flow chart and why? A cash flow is the single most important aspect of your business because it focuses on the actual cash that goes in and out of your company. Without knowing your costs and expenses you will not be able to project your income needed to make a profit in your business.
From : Judy
Location : Cedar Rapids , IA
Question :
I struggle just coming up with a template to use to project out my cash flows. I use Excel, but don't use it well. I can look at last months and know where cash went, but I want to look out to the future...1 week, 1 month, 1 year. Any tools or templates that work better than others?

 

Reply :
Template for Cash Flow www.score.org business services template gallery for a 12 month cash flow There are other resources online some are free and some are not. Look into accounting software for this feature as well.
From : EMEKA
Location : LEWISVILLE , TEXAS
Question :
I NEED A LOAN TO COMMERCIAL REAL ESTATE AND OWN A MANAGEMENT COMPANY, HOW CAN I GET THIS AMOUNT OF LOAN TO START.PSYCH6619@TX.RR.COM. JUST FINISHED COLLEGE, PLEASE HELP

 

Reply :
Emeka When getting a loan,there are 5 elements a borrower should have to obtain credit and to qualify for a loan: 1. Character-integrity, 2. Sufficient cash flow to service the debt 3. Capital-net worth 4. Enough Collateral to secure the debt 5. Conditions is the time right to borrow Is there enough income to cover all the expenses and pay the mortgage, taxes and insurance? When getting a loan you must be prepared, the bank will require a business plan, personal tax returns, financial statements, references, relevant business experience, a strong credit score, personal capital investment and a clear idea of how much you need to borrow. You have to show that you have the ability to pay back the loan. Go to www.sba.gov for special loan programs or a bank that you are currently doing business with that you have a relationship with to inquire about the financing options.
From : kenneth middleton
Location : indianapolis , indiana
Question :
hi my name is kenneth. im a 17 year old from indianapolis indiana. and i was woundering do u have any advice for me to get into business. i want to start a home business focused on cheep prices and real brand things. if u can help please help if u cant thanks for reading these.

 

Reply :
Ken Go to the industry trade shows and find the companies that you want to deal with. Determine the terms of how you can do business with them. Most companies will require minimum orders and minimum dollar amounts to be purchased annually. Do your research and find out which companies you want to do business with. Good Luck
From : Liz Bishop
Location : Birmingham , AL
Question :
How do I register for the live web chat? I must be missing something!

 

Reply :
http://web.sba.gov/livemeeting/Sep10/.
From : Joe
Location : Bloomfield , Indiana
Question :
How would I get a government grant to purchase more equipment and possibly pay off some debt ?

 

Reply :
Joe, Thank you for the question www.sba.gov for information on special loan programs go to small business planner and Finance Start up. You can also consider leasing equipment or getting an equipment loan from the company you are getting the equipment from. Consider purchasing used equipment if possible. Paying off debt must come from the sales from the business. Analyze your pricing to make sure that you are making enough profit. If you have too much inventory that is not selling figure out a way to close it out to create some cash flow for the business. Without knowing the type of business you have and the type of equipment you need to buy it is hard to advise.
From : natalie
Location : mt. Dora , FL
Question :
if unable to secure credit and credit has been cut or credit lines closed how do do or do you keep the doors open to your business?

 

Reply :
If you are unable to secure credit and your credit lines have been closed how do you keep the doors open to your business? You will need to sell the inventory that you have and pay cash for all inventory that you need to purchase and all services until you can build up your credit again. Managing your money with your cash flow chart will help so that you are aware of all expenses. Cutting expenses and increasing sales is always the goal.
From : Jerry Chautin
Location : ,
Question :
Hi Julie, How important is it for start-ups to calculate their break-even point and what is the easiest way for a non-financial person to do it? Thanks for volunteering. Jerry Chautin Business columnist Volunteer SCORE business counselor, Atlanta, Sarasota & Murphy, NC Former entrepreneur, commercial mortgage banker, business lender

 

Reply :
: How important is it for start ups to calculate their break even point and what is the easiest way for a non financial person to do it? A simple spread sheet that lists all the income from sales each day, week, month and year and all the expenses that the company has to pay out. There are templates online that you can use as an example www.score.org Business tools and click template gallery.
From : Zainab Mehdi
Location : Riverside , CA
Question :
We are a small preschool running since February 2010 We are struggling to fill in our capacity and on our financial strength. We are running in negative as our fixed expenses are too. high. We are seriously looking for grants and other opportunities to sustain our program. You can visit our website youthskillscenter.com for more details. You can reach me on my cell 909-821-0010 for any questions. I would greatly appreciate any assistance from your end.

 

Reply :
Owns a pre school can’t fill capacity. Expenses are too high. Are their any grants available? There may be some government programs that you qualify for. You will have to look into your state resources. Department of Administrative Services. Health Department for programs. Department of education. I am not aware of any grants unless you are a non profit organization.
From : David D
Location : ,
Question :
What is the difference between profit and cash?

 

Reply :
What is the difference between profit and cash? Profit is what is left after all of your expenses are paid. Cash is all the cash in the bank, inventory and any asset that can easily be turned into cash.
From : Judy Frizlen
Location : Buffalo , NY
Question :
1.Salaries are the highest expense; what percentage should we strive for? 2.How can you raise prices and retain customers?

 

Reply :
Salaries are the highest expense in a business what should we strive for? There are industry standards for your type of business that you can find from the trade association or www.bizstats.com or www.sba.gov
From : Ryan Taylor
Location : ,
Question :
What online resources are available to new business owners who are not familiar with cash flow techniques?

 

Reply :
Online resources for new business owners not familiar with cash flow: www.score.org for information on cash flow and templates for financial statements needed for your business. Your accountant should also advise on how to set up the books for the business and the software that your company should use to manage the business finances
From : Cindy
Location : Murfreesboro , Tennessee
Question :
I am thinking about buying a consignment shop. It has been opened for 8 yrs. She is surviving but with no advertising, illness now and cant keep open. She does little to keep up o date and has over 1000 consignors. No lease and to buy need about 15000-20000. Do not know the route to go for funding. Would like to take wit 10000 down and a % for next couple years but not sure this is possible. she is asking 180000. My plan is to include local college fashion class to assist while getting their hours in for edu. Later move to better location. proper notice for current clientele begin with spruce up on store. Any advise. Cindy

 

Reply :
Buying a consignment shop for $180,000 no lease needs 15,000-20,000 down has no idea how to get funding. All Banks will require that you have a good credit report they look at your payment history. Do you pay your bills on time? How much do you owe on your credit cards, Credit History if you had any delinquencies, disputes or charge offs, types of credit used, loans, mortgages, credit cards any judgments, liens, tax liens to start. To check your credit www.annualcreditreport.com for a free credit report and to check if there is anything on your report that does not belong 877-322-8228 this is a government sponsored website that provides you with a free credit report once a year. There are 5 elements a borrower should have to obtain credit and to qualify for a loan: 1. Character-integrity, 2. Sufficient cash flow to service the debt 3. Capital net worth 4. Collateral to secure the debt 5. Conditions is the time right to borrow When getting a loan you must be prepared the bank will require a business plan, personal tax returns, financial statements, references, relevant business experience, a strong credit score, personal capital investment and a clear idea of how much you need to borrow. Go to www.sba.gov for special loan programs or a bank that you are currently doing business with that you have a relationship with to inquire about the financing options.
From : Alyson
Location : Cherry Hill , NJ
Question :
Are there any grant available for Small Business Start up or Women Owned Business Start Up Grants?

 

Reply :
Alyson looking for grants for start up woman owned business? There are no grants available that I am aware of for a start up business. www.sba.gov for information on special loan programs. Start up money usually comes from personal savings, friends and family. Once the business is up a running a showing a profit a bank loan is the next step.
From : Don
Location : Laurel , In
Question :
I have been in business for 25 years as a small business always paid off my line credit with interest..never late. I was told by the bank i have done business with ...."Will not renew line of credit". I have gone to credit unions, local banks, and they will not loan money to me for line of credits. WHERE CAN I GO FOR HELP? NO BANKS ARE LOANING MONEY.

 

Reply :
Don Have been in business for 25 years the Bank will not renew my credit line. Went to credit unions and banks and no one is loaning money. Where can I go for help? Contact your vendors and see if they will extend credit to you and everyone you are doing business with. The other alternative financing options are Barter, factoring and purchase order financing, home equity loan, borrow from friends and family in the form of a note.
From : Sarah Corner
Location : East Falmouth , MA
Question :
How would you recommend a small business acquire money to help with cash flow issues. Grants, etc? Any recommendations would be greatly appreciated! Sarah

 

Reply :
: Sarah How can a small business acquire money to help with cash flow issues? It is a difficult situation, cash flow problems are common in business be aware of too many receivables, too much inventory, and high overhead costs. All costs and expenses have to be looked at and a focus must be on generating more sales and always make sure that there is enough profit margin. Your accountant can help with cash flow issues. www.score.org or www.sba.gov for information.
From : ANNA
Location : HAGERSTOWN , MD
Question :
I have a hard time getting clients to pay on time. If our clients do not pay on time I have a hard time meeting our expensises. Any suggestions on how to get paid quicker?

 

Reply :
Anna I have a hard time getting clients to pay? Any suggestions. You can offer a discount for COD or net 10 days it could be 2% off for paying more quickly otherwise the only way to get paid quicker is to call weekly and remind your customer that money is due and offer to take a charge card over the phone. If the customers are slow paying you can also put them on COD(cash on delivery)
From : Joseph Sosa
Location : Lindsay , Ca
Question :
I am in the process of opening a coffee shop here in Central California. How much inventory should I purchase for start up so that I do not overbuy. Thanks

 

Reply :
: Joseph is opening a coffee shop and is asking how much inventory to purchase for start up? With your financial projections you can guess about how much you will be selling. Buy as little as possible to start but make sure that you can get a quick delivery as you never ever want to run out of anything. This is something that you will learn as you are in business.
From : Cheryl
Location : Aurora , CO
Question :
Thank you for all of the great advice Julie!

 

Reply :
You are so welcome It was a pleasure participating in todays Web Chat
From : Richard Lewis
Location : Falla Church , VA
Question :
What affect will the new legislation have in helping 8a, minority, woman, service dabled vets that are start ups or have a tainted credit history?

 

Reply :
thank you for your question this should help www.sba.gov/jobsact
From : Matt
Location : Orem , UT
Question :
First Question: We submit questions here and she answers? We don't login to anything?

 

Reply :
Correct
From : Judy
Location : Cedar Rapids , IA
Question :
I created my own spreadsheet to project cash, but it doesn't work smoothly. Do you have a template that works well for projecting 1 day, 1 week, 1 month, 1 year?

 

Reply :
Judy The template for the cash flow is on the www.score.org under business tools choose template gallery and also have your accountant help you with the details as they are an expert in this. Good Luck
From : Matt Fuller
Location : Orem , UT
Question :
What are some good practices for cash flow when customers insist on net 30 terms, and the company is experiencing 50% or more growth?

 

Reply :
Matt net 30 are standard terms once you have done a credit check and have a relationship with your customer. If you want your customer to pay sooner offer an incentive 2% net 10 or COD.
From : Cheryl
Location : Aurora , CO
Question :
Is there a set percentage to mark up the prices for merchandise. Also, if I can get a discount from a vendor for purchasing a higher volumn, do I sell it at a discount or should I sell it at the price I had before the discount?

 

Reply :
Cheryl That is a great question. A mark up can vary depending on what your overhead costs are. Higher overhead would require a higher mark-up. Always sell your merchandise for as much as the market will bear. If there is a higher perceived value people will pay more. The discount from the vendor means more profit in your pocket. Good Luck
From : Suzett Moffitt
Location : INDIANAPOLIS , Indiana
Question :
I have been in business for two years, how can I get the capitol I need to grow my business, and receive contracts from SBA? I am a woman owned company, and I can't get the nformation, nor money I need to grow my business, because I don't have the 10% required for my loan; what do I do next, and how do I get the money, I so desperately need?

 

Reply :
In business for 2 years looking for SBA contracts and capital. Don’t have the 10% down required to get a loan. When getting a loan it is essential to be able to show that you can repay the loan with the profits in the company. www.sba.gov has information government contracts and each state has an agency that posts the government contracts that are available to bid on.
From : Devon Henry
Location : Newport News , VA
Question :
Is it best to work with your CPA to establish your overhead for estimating purposes?

 

Reply :
Devon, Great question...absolutely work with your CPA to help you with all your accounting, pricing, budgets and all your tax questions. Your accountant is an invaluable resource and will help you stay profitable as your business grows
From : Niki
Location : Sumter , Sc
Question :
Hi I'm interested in finding out what programs you have that help assist those with disabilities start their own business

 

Reply :
Niki Programs to assist those with disabilities to start a business. SCORE has workshops and seminars available for anyone who wants to start a business. There are online webinars, podcasts that go over every aspect of business.
From : elaine belanger
Location : center , tx
Question :
What options do micro businesses (mom & pop) size have in obtaining periodic help needed with smal loans to help with cash flow?

 

Reply :
: Elaine What options do small businesses have in getting periodic help with cash flow? A line of credit is the easiest way to have money available as needed. You would have a limit and use it as needed and pay only for what you use. If you are not able to get a line of credit you need to make sure that your sales increase to create cash flow. Give your customers incentives to buy more or offer discounts.
From : U.S. Small Business Administration
Location : Washington , D.C.
Question :

 

Reply :
Thank you all for your excellent questions and for joining me today. Good Luck and feel free to keep in touch with me. www.score.org or jbrander@newhavenscore.com
From : U.S. Small Business Administration
Location : Washington , D.C.
Question :

 

Reply :
Thank you for joining us today for our webchat. Please submit your questions. If your questions don't get answered feel free to contact me directly at jbrander@newhavenscore.com or go to www.score.org or www.sba.gov for assistance in business tools, resources, online workshops, loan programs and business templates. Good Luck Julie
From : Angie
Location : ,
Question :
At what point should you consider using a collection agency to help you collect on past due receivables?

 

Reply :
Angie, Great question. Collection agencies take 30% So try to collect on your own by calling and offering credit terms or returns or credit card payment. If the company does not have the money you will not be getting paid so your only hope is to take back the merchandise if you can.
From : Mrs. S
Location : ,
Question :
How do I know when this has started?

 

Reply :
It has started post your question and I will be happy to answer....
From : ellen brennan
Location : sarasota , fl
Question :
What is the formula to determine how much cash reserves a business should hold.

 

Reply :
Ellen Great question. Always have enough cash reserves to cover your slow months in business if you can have 3-6 months or more to cover all unknown or variable expenses that may come up you should be safe. Always consider increasing your sales and moving your inventory as quickly as you can.
From : Ohryn Fox
Location : San Francisco ,
Question :
Can you define cash flow? Is it simply revenue minus all cost?

 

Reply :
Cash flow is thew single most important aspect of your business. It is the actual cash that comes in from sales ans the cash that goes out for expenses. www.score.org has more information
From : elaine belanger
Location : center , tx
Question :
In this economy I have several compaines that strictly hold to 90 day payment for their invoices. I do add a 12.00 late fee charge for evey month they do not make a payment and end up not being able to collect the late fee, then I write the late fee off. Is that what other business are expreriencing? and is that protocol an exceptable write off?

 

Reply :
Elaine, All write offs have to be discussed with your CPA as they are the experts in tax.
From : Ed Piekarz
Location : Nokomis , Florida
Question :
Would you suggest a Cash Flow Chart be developed for a start-up that has not yet developed a Business Plan?

 

Reply :
Ed, Yes make a list of all the start up costs or one time expenses, the monthly fixed and variable expenses and project your sales to see if this business is feasible. The money is essential in business and knowing if you have enough to start and how much of a shortfall you will have. In that case you will decide how much of a loan you will need. Planning is essential. good luck
From : elaine belanger
Location : center , tx
Question :
Comment: Judy, I am looking for the same kind of spread sheet.

 

Reply :
Elaine www.score.org and under business tools there is a template gallery for spread sheets Good Luck
From : anna
Location : , CA
Question :
Are there any loans or programs out there to help either minority women and/or women in general start a business and where can I get info on this?

 

Reply :
Anna www.sba.gov for special loan programs for minorities and women.
From : elaine belanger
Location : center , tx
Question :
How do you calculate how much your business could be sold for?

 

Reply :
Elaine, Your CPA can do a business valuation but in todays economic state your business is only worth what someone is willing to pay. you may want to consider creative financing to help a buyer purchase your business. You could offer owner financing as well. Good Luck
From : joong lee
Location : santa ana , california
Question :
Dear Julie Brander I need micro loan for my small business(restaurant). It is really hard to get money from bank. I'm not good english as korean and hard to speak english well. How do I solve this cash flow difficulties? Thank you.

 

Reply :
Joong For a micro loan which is a loan for $35,000 or less www.sba.gov Small Business Planner, Finance Start-Up Microloan information. For cash flow difficulties you may want to analyze all the expenses and determine how you can save money. Your accountant should be able to advise as well as determine your profit margin. Are you charging enough money, can you cut expenses, purchase things for less, etc?
From : jean basha
Location : New london , CT
Question :
I am in the exporting business. I have two busses that I want to send to haiti for business purpose. I wonder if there is a possibility to qualify for a loan to send them down there and to pay another fee at the terminal port.

 

Reply :
EXPORTING BUSINESS: When exporting to another country make sure that you are banking with an international bank who has the capabilities to do letters of credit and have the ability to do the exchange rates for currency in other countries. You may also want to find out which shipping companies UPS, Federal Express offer COD (cash on Delivery) when shipping overseas. www.export.gov for information or 1-800-872-8723
From : Darrell B. Searcy
Location : Palm Beach Gardens , FL
Question :
Is there a webinar taking place?

 

Reply :
Yes it is a web chat you can post your question
From : Darrell B. Searcy
Location : Palm Beach Gardens , FL
Question :
Is there anyway that we can have this session as a traditional training webinar? This format is very ineffective

 

Reply :
Darrell There are many webinars available www.score.org has them The Street offers them www.sba.gov/training there are many online training courses available. Good Luck
From : Richard Lewis
Location : Falla Church , VA
Question :
Your answer to my previous question: What affect will the new legislation have in helping 8a, minority, woman, service dabled vets that are start ups or have a tainted credit history? Is pure government spin. There is the REAL world where banks have to rate their credits as to RISK. To date one of the hold backs from the bank side is the Federal Reserve Examiners, not the amount of money available. Are you able to give me a real world answer to the question?

 

Reply :
Richard, In todays economy banks are not taking risks with people who have a tainted credit history. It would be important to repair your credit and know that it may easier to borrow money from friends and family or other alternative ways like asking vendors for longer credit terms, lines of credit or home equity loan. Not sure where you are in the planning process. Good luck
From : Richard Lewis
Location : Falla Church , VA
Question :
It's not my credit rating I'm worried about. I just retired from a major bank where I worked in the secured lending areana, i.e. factoring, ABL, PO financing. As to my question, I am asking what will the government do to good businesses that may have sustained losses, are highly leveraged, etc.

 

Reply :
Richard, These issues are explained in the jobs act www.sba.gov/jobsact The bill was just passed on Monday and the actual details are still being determined.