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Cash Management

2 Posts authored by: Karen Harrison

Improving Cash Flow Management_Sized.jpgby Karen Harrison


Eighty-two percent of businesses fail due to poor cash-flow management, according to a study by Jessie Hagen of US Bank, cited on the SCORE website.


The most common cash flow contributors for small business failure include unexpected growth, insufficient capital, poor inventory management, lack of available credit to manage cash flow, and commingling of business and personal funds, according to the National Association of Women Business Owners (NAWBO).


Planning is the key to successful cash flow management.  Here are five valuable practices for small business owners to assist with establishing a healthy cash flow.


1. Get paid ASAP.


Leveraging electronic payment options is an excellent strategy to get paid faster as they are processed more quickly than standard transactions.  There are a variety of options for online payments: same-day funding with merchant services, ACH payments, wire transfers, electronic check scanner for larger checks, or mobile check deposits for smaller items – all easily managed from your office or online.  If you can be paid in advance or at point-of-sale, do so; otherwise, invoice often, secure deposits, provide incentives for early payments, and tightly manage receivables.


2. Never be short on cash.


Establishing a line of credit to cover cash flow gaps or shortfalls, caused from timing differences between payables and receivables, seasonality, or short-term cash needs (less than one year). There is no cash advance fee when leveraging a line of credit – think of it as ready cash to meet immediate cash needs.


3. Delay cash outflows.


Try using a small business line of credit as a cash flow tool, providing a typically lower-cost alternative to other forms of credit. Also, a small business owner can set up extended payment terms with vendors/suppliers, and leverage electronic payments to control cash disbursements.  If you can’t delay payments, attempt to negotiate payment discounts for early payments to create a positive margin.  For day-to-day expenses such as office supplies or gas, a small business credit card is a great solution because it provides a grace period on interest up to 30-45 days and may even pay you cash or rewards in the process.  Look for a small business card without an annual fee.


4. Hold onto your cash.


Leverage today’s low-cost, long-term financing to purchase and/or refinance assets, such as commercial vehicles, equipment, and commercial real estate, as this could help your business sustain needed liquidity.  Securing a long-term low rate today could mean rate protection for the future, which can help you secure low monthly payments for improved cash flow and budgeting.


5. Pay yourself, not a landlord.


Buying instead of leasing owner-occupied commercial real estate can help stabilize payments, protect against rent increases, build equity, and create an asset that can be sold, borrowed against, or leased to third parties.  If you work from home, consider a residential home mortgage loan.  Many small business owners are surprised to learn that purchasing can often be more affordable than renting or leasing.


Simple strategies can create big wins.


By maintaining a mindset that cash is king, and exercising strategies to maximize cash flow, small business owners are better prepared to manage growth, change, and unexpected surprises, as well as take advantage of new opportunities as they arise.  Meeting with a small business banker can help you evaluate your business priorities, including your cash flow needs, and identify the right financial tools to help your business succeed.




More than three million entrepreneurs turn to Bank of America Business Advantage to provide a competitive advantage to help their businesses grow. That’s because the bank’s high-tech, high-touch approach provides industry-leading guidance, connections, tools and solutions, along with the dedicated support to address small business owners’ unique needs to bank how, where and when they want.


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When managing a small business, owners will say cash is king. Or, as Zeynep Ilgaz will tell you, “cash is queen.”


Ilgaz, founder and CEO of Confirm Biosciences, Inc., started her business, as many small business owners do, with her own funds – in her case, $2,500.  Getting from there to the $14 million revenue business she leads today was an exercise in cash management that took a very disciplined approach.


“When we started, we were laser focused on managing cash,” Ilgaz said. “Our philosophy was that if we didn’t have cash, we didn’t have a business.  So we implemented strategies to bring cash in as fast as possible and slow down paying cash out.”zilgaz.jpg


Confirm Biosciences is a worldwide provider of substance abuse and health testing products and services.  Managing cash flow meant keeping costs to a minimum.  The company initially started online and didn’t carry inventory.


“We drop-shipped product and required payment upfront.  We would collect payment by credit card or wire transfer to reduce risk, and we eventually leveraged a line of credit to help manage cash flow,” Ilgaz explained.  “We also worked with our suppliers to extend payment terms, which allowed us to be in control of cash outflows.”


“Our mentality was always to get cash in advance to pay for our growth and cover costs.”


The strategy worked.  In 2008, when the company started, Ilgaz and her husband occupied a small, 1,000-square-foot building.  It was just two people  and one big dream.  Today, 10 years later, the company resides in a 23,000- square-foot facility in San Diego County, employs over 50 teammates and sells product worldwide – both on a wholesale and retail basis.


“I get asked if there was a defining moment in my business that really set the course of our success,” Ilgaz said.  “I think there are several important factors – first, be honest and transparent, and represent who you are, and then have a mindset of being flexible and able to adapt and change.  We have always maintained the philosophy that managing cash is the most important strategy, and that lens helped us to continue to look for opportunities to increase control over cash.”


Today, Confirm Biosciences warehouses its own inventory, which allows the company to maintain tighter control over quality, execute faster, and reduce the administrative costs of working with third parties.


“I also advise small business owners to organize a Board of Advisors, which is different than a Board of Directors,” Ilgaz explained.  “Our advisors have helped provide critical coaching and mentoring.  For example, when I made a presentation to Walmart, one of our Advisors was a very powerful CEO and able to provide invaluable insight on how to pitch and approach a large retailer, and this guidance helped us win this contract.”


The importance of managing cash is a frequent concern expressed by small business owners. It is a recurring theme that appears in small business surveys, including the Bank of America Small Business Owner Report.  “Strong cash management means leveraging forecasts to manage cash, and always knowing what your cash needs are throughout your operating cycle,” Ilgaz said. “Maintaining good relationships with vendors, suppliers, creditors and your banker can help a company establish terms to help manage cash flow needs.  We knew, for example, that the move into retail meant we would need more cash, and that the margins would be tighter than wholesale.  Timing became that much more critical, and the increased focus on cash management that much more important.”


Another best practice for small business owners to consider is to remain connected with nonprofit organizations that support small businesses, and provide a forum to share ideas and experiences.  One such organization is the National Association of Women Business Owners, or NAWBO.  “Be willing to reach out, listen to the experiences of others, and be open to change,” Ilgaz said.  “The relationships you build with other business owners and leaders can help you gain insight into your own opportunities.  All great companies start with great relationships with others.”




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About Karen Harrison

Karen Harrison Bank of America.3.JPG

A 25-year banking veteran, Karen has held senior executive management positions at leading financial institutions prior to joining Bank of America in 2011 as the Small Business Banking Manager for San Diego, Imperial and South Riverside counties. During her tenure at Bank of America, she has also served as a National Sales Performance Manager for Small Business and Market Manager for the Small Business Client Management team for the West Region.


Karen is actively engaged in the community and is a recipient of the Global Diversity and Inclusion award at Bank of America. She currently serves as the Executive Sponsor for Bank of America Community Volunteers/San Diego Market, Chairman of LEAD for Women, San Diego Chapter, as well as serves on the Board of Directors for LEAD San Diego, Junior Achievement of San Diego, and the National Association of Women Business Owners (NAWBO) San Diego Chapter, the Women’s Leadership Council for the United Way, and the California’s Women Leaders Network at Bank of America. She is a former Big Sister for Big Brothers/Big Sisters of America. An honors graduate, Karen holds an MBA from the University of Phoenix and a BA from California State University, Fresno. Karen is married, resides in San Diego, California, and has eight Godchildren.

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