Financial Intelligence: Short On Cash

If you're making a profit but running out of money, here's how to fix it.

By Lori Johnston August 29, 2014

SALES ARE UP AND CUSTOMERS CAN’T SEEM TO GET ENOUGH of your product. But when you review your balance sheet, the cash seems to have disappeared.

Businesses must have cash to survive (hence the “cash is king” idiom). If owners don’t understand how bringing business in the door translates to cash flow, they can get into trouble. Sometimes owners are focused on making the next sale versus looking at the big financial picture, says Bethany Carr, a CPA with Cavanaugh & Co. in Sarasota.

Here are seven ways to keep more cash on hand as your business grows.


To determine how much cash will be moving in and out of your business, consider projected revenue and expenses over the next year or two. Looking into the future can help you prepare for major purchases, such as upgrading equipment, and help you get through an off-season slowdown. Cash flow depends on your balance of cash minus what you are paying out over a period of time. Carr’s advice: Instead of making spontaneous spending decisions on a day-to-day basis, budget for the year and follow the budget.


Creating a forecast and then ignoring it can be disastrous. Sarasota CPA Kathleen Hargreaves of Kerkering, Barberio & Co. sets up her clients with a dashboard that pops up daily or weekly on their computer, cell phone or other devices with key indicators such as sales and collections. Software such as Excel and QuickBooks have dashboard functions. It’s an organized way to see cash coming into and going out of the business, to keep an eye on the big picture and spot potential problems. You also can monitor client numbers, salaries and other costs such as marketing expenses, and compare them to past weeks or the previous year.


“Profitable companies look up and say, ‘I’ve got all this profit but where’s the cash?’ Try to collect your accounts receivable as fast as you can,” says Jim Parrish, a consultant with the Florida Small Business Development Center at USF. A strategy is to compress the gap between when you collect accounts receivables and when you pay your bills. For example, establish a policy to get paid sooner by customers, such as shortening the due date from 90 to 30 days. Then hold onto your cash for a bit longer; don’t rush to pay your bills the day you receive the invoice.


Most business owners look at their income statement and they think they’re OK, then buy more inventory, says Jim Repp, a retired CPA and certified mentor for the Manasota chapter of SCORE. That leaves no funds to operate the business or to plan for the future.


Are you utilizing your existing technology and software, such as that new billing system, to its fullest? Doing so could help you get rid of overtime or eliminate positions, or move an employee into a different position because you can automate certain duties, Hargreaves says. Also, research salaries and make sure they are consistent with your industry. Some companies with a cash crunch also have found a one-time fix by shifting the payroll date. A one-week lag time, for example, can generate an extra five days of cash flow.


Investigate other sources of cash such as investments in company equity, long and short-term loans, and selling fixed assets.


Resist the urge to buy a new company car every year, or scale back on how much you spend on high-price meals and trips to court clients.  ■

Financial Intelligence Cash Quiz

If you know the answers to these questions, congrats! You are managing your cash flow.

How much cash does my company have?

How much cash does my company need to operate and when is it needed?

Where does my

company get cash and where is it spent?

How do income and expenses affect cash?

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