How To Increase Your Cash Flow Through Your Accounts Payable

It’s time to sit down and pull out your accounts payable. Once you have all the paper work out, then rank all of your payables vendors by size from largest vendor to the smallest vendor. Put your fixed vendors at the bottom of the pile. Fixed vendors include your utility company, municipalities, and bureaucracies. Please put them in this order.

Once this is done, call in your sales team and see if there are vendors you can consolidate or eliminate. If some of your larger vendors can give you the same products, then eliminate the little guy. Only keep the little guy if his products are superior to the large vendor. You do not want to diminish the quality of your products or services. Right now you are just focusing on reducing the number of bills you have to pay each month.

Next contact the remaining vendors based on that list. Meet face to face with their reps if you can, but try to avoid emails. You want to have a conversation with them and get them to realize that the two of you are a team. The two of you are in business together and you want to do everything possible to ensure that they are successful and paid in a timely manner, but you also want to make sure that you receive the best possible prices and services available.

When you meet, the most important step is to ask them if you pay your invoices early will, they give you a discount on purchases. Say for instance “If I pay you in 15 days from the date of the invoice will you give me a 2,3, 4, or 5% discount?” If they offer it, take it. Keep in mind they want to improve their cash flow as much as you do. For those companies that will not give you favorable payable terms and discounts move them to the bottom of the list and set them up to be paid no sooner than 30 days or more if possible. Whatever you do, do not set yourself up to get a late payment fee when doing this. If they contact you to be paid sooner, then tell them if they give you a payables discount you will pay them sooner.

As for the fixed vendors at the bottom of the list – the utility companies, municipalities, and bureaucracies, set up your payables to pay them at the very last possible day allowed. Why give them money any sooner, you’re a better investor of your money. Just keep paying them on time, but not a day sooner.

These tactics have been tried and proven over the course of time. Many small businesses here in Longmont and Lyons, Colorado have utilized these tactics and improved their cash flow. These tactics have helped them get around 5-8% more cash flow.

Do you think your business would do better if your cash flow was greater? Just think of what you could do with all that money? …

-You could expand to reach other towns outside of Longmont.

-You could put money aside to set up a retirement account for you and your employees. This is a big tax savings for businesses!

-Take the time to go on a family vacation and have the money to pay a manager to keep an eye on your business.

Whatever you choose to do with that cash flow, know that you’ve made a difference in our community here in Colorado. We are so glad you are in business.

“Keep going and keep growing!” ~Laura Meyers, Owner of MD Bookkeeping & Internet Services LLC