5 Cash Flow Management Strategies for Franchising Vets

When the cash starts flowing, the last thing you want is to lose track.

For veterans starting out as new franchise owners, cash control is paramount – getting it just right is how you optimize profitability and growth.

For starters, cash flow management is a simple philosophy: delaying your cash outputs as long as possible, while maximizing input by ensuring you’re paid as quickly as possible.

This usually involves when you pay your suppliers and employees, and the times you collect payment from your customers and clients.

Here are 5 Cash Flow Management Strategies for Vets:

1. Prepare and Measure. Prepare cash flow projections ahead of time, to ensure you always maximize the amount you have on hand. This could involve yearly and quarterly views, or, if you’re just starting out, even monthly and weekly projections. Understand that these are just predictions, though – so be sure to have enough (or even more) cash on hand just in case, and measure your projections to compare various information.

2. Be Meticulous. A huge part of making accurate projections is not only know when money will be spent, but on what types of thing. In order to track this effectively, have a line item projection for major things such as overhead costs, significant cash outputs, inventory, sales, and salaries.

3. Optimize Payment Time. Unless you’re receiving upfront or instant payment from customers, it’s crucial to speed up the time it takes to get paid. Depending on the type of franchise you’re operating, you can improve upon this by making clients pay deposits, provide incentives for fast payment, or track accounts receivable and follow up quickly on tardy accounts.

4. Stretch Your Own Outputs. If a supplier’s invoice doesn’t need to be paid for 30 days, pay it in 30 days. To help do this, use an electronic cash transfer and pay on the last possible day – this way, you’re stretching your cash while also fully complying with all payment deadlines.

5. Act Quickly Upon Shortfalls. No matter how successful you are, there may come a time when cash flow is low. Whatever the case, the most important thing is to act quickly and efficiently to effectively manage it. Because of this, if you need to take a loan from the bank, let them know as early as possible – months in advance, if you can. If the banks won’t help, work with your suppliers to extend their payment dates, and to ask your best customers to pay a little faster.

To learn more about entrepreneurship through franchising, attend our free monthly webinar, Franchise Ownership as a More Stable Career Path. The webinar is free, but you need to pre-register, which you can do online by clicking on the linked seminar title.

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