Weekly Cash Planning Tips

How to keep your business in the black for the short- and long-term.

By Charles N. Persing  On Jan 29, 2016

The three most common troublesome signs found in entities heading for bankruptcy are: 1) no cash planning; 2) payroll and sales tax issues; 3) the reliance on “hope” as a strategy. 

Cash forecasting and a periodic analysis of your financial statement enables you to get a jump on what ails your business. Below are some weekly cash planning tips to help guide your business through the ups and downs of its cash cycle.

Create Your Own Planning Tool 

Construct a spreadsheet for cash planning for the next 8 to 13 weeks. The spreadsheet should consist of cash collections and expenditures and have a weekly net change and ending balance. List the dates across the top and the receipts and disbursement down the side. Add formulas to the total and fill in the weekly numbers. Maintain your spreadsheet once a week. Reset the beginning balance and revise the future expected receipts and payments.

Collections

Estimating cash receipts is tricky, but once you analyze billing and collection history, you can make estimates of receipt patterns such as: “This month’s collection will be approximately 30 percent of last month’s billing plus 60 percent of the prior month’s billing and, finally, 10 percent of the month before that billing.” Breaking those amounts into weekly amounts is a function of your customer’s payment habits. For cash and credit card sales, you should look at the past trends and adjust for seasonality and sales trends. Consider the following billing tips:

• Bill business clients monthly or when the service ends. Do not wait until the end of the month to bill for completed services.
• Bill for sales upon shipping.
• Send statements monthly for all customers and bi-monthly for delinquent customers.

Speeding Collections

• Discounting – Offer reasonably-sized discounts to motivate top customers to pay early. Offers can be as low as 1 percent for payments received within 10 days. That 1 percent may be just the incentive you need to bring about immediate cash flow.
• Payment by credit card – Delinquent customers paying by credit card for late balances or new purchases gives you immediate cash.

Disbursements:

Break disbursements into manageable categories such as payroll, sales tax, rent and utilities, etc. Project recurring payments like rent, bank loans, key vendors, payroll, 401(k) and payroll taxes when due. Never delay payment of payroll or sales tax, or you will pay penalties, interest and other fees to correct the issue.

About the Author: Charles Persing, CPA/CFF, CIRA, CVA, CFE, is a partner in the insolvency and litigation services division of Bederson LLP.

 

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