Managing Cash Flow -

Managing Cash Flow

Are you paper rich but cash poor? A business can be profitable on paper, but bankrupt in real life - if you don't manage cash flow effectively. Without cash, a repair shop will inevitably shut down, regardless of how profitable it looks on paper. You can be "rich" in accounts receivable and inventory, but cash poor if these assets are not convertible into cash to meet current obligations. In fact, cash is the only asset a company needs to stay in business.

Are you paper rich but cash poor? A business can be profitable on paper, but bankrupt in real life – if you don’t manage cash flow effectively.

Without cash, a repair shop will inevitably shut down, regardless of how profitable it looks on paper. You can be “rich” in accounts receivable and inventory, but cash poor if these assets are not convertible into cash to meet current obligations. In fact, cash is the only asset a company needs to stay in business.

All of your expenses – materials and supplies, utilities and wages, for example – add up to a steady outflow of cash that must be backed with sufficient income or reserves to meet these obligations.

So, how do you ensure a steady inflow of cash? Strategies that have worked for other independent businesses include:

• collecting on accounts receivable
• borrowing
• decreasing assets
• offering customers a modest discount for full payment within a limited time
• maintaining strict control over inventory
• making installment payments on equipment rather than paying in full
• accepting credit-card payments from customers

Above all, make sure you continually forecast your shop’s cash needs. Estimate incoming cash based on sales volume and customer payment histories, and spend accordingly.

Courtesy TIRE REVIEW.

You May Also Like

Tax Planning Strategies For 2023

As the end of your tax year approaches, several general rules might help guide you to real tax savings.

The owners, operators and managers of many service and repair shops rely on the tax-saving abilities of professionals or software programs. Substantial tax savings are, however, largely the result of moves undertaken before the close of the tax year.

The income-shifting strategy of accelerating income to offset unusually high expenses, or postponing income until a later year when the tax bill may be lower, works only for those using the cash basis method of accounting. Every business can, fortunately, employ a number of legitimate strategies before the end of the year that make tax preparation easier, as well as producing a smaller tax bill.

How First-Time Auto Shop Owners Can Find Financing Options

Find financing by knowing your market, making yourself viable and having an experienced team.

Trends That Drive Aftermarket Service Opportunities

Economic data is often out of date before it’s been analyzed – but here’s current information about the auto aftermarket.

Supply Chain Procurement Management 101: Making Better Purchasing Decisions

Strategies for managing the impact of freight disruption.

Use This Everyday Technology To Fight Identity Fraud

Mobile and ID scan technologies, now widely used in online banking, could help dealers during online transactions.

Other Posts

Grow Your Shop – Spend Money to Make Money

Never be afraid to part with cash if your business will benefit in the long run. It’s an investment, not a problem.

What Your Credit Score Can Do To Your Business

Having bad credit can be damaging for shops because it keeps you from pursuing growth or strategic decisions.

5 Reasons Planning Beats Panic

Business may be turbulent, but being prepared will help make the journey more enjoyable.

Online Ordering Isn’t A Fad

Online sales in the automotive aftermarket continue to grow.