Situation: The Company is seeing an upswing in work and backlog, but doesn’t have cash on hand to support the work. The bank won’t increase our credit line. How can we increase cash flow and better position ourselves with the bank?

Advice from the CEOs:

• First, try to speed payments from customers or delay payment to vendors.
  • Add a schedule of values to contracts to prompt earlier payment. Sweeten early pay terms.
  • Ask for money up front to cover out of pocket costs.
  • Ask vendors for additional time. They’d rather be paid later than not paid at all and can be surprisingly supportive if approached honestly.
  • Negotiate terms with customers and suppliers in advance. This gives you additional information to take to your bank.
  • Slow down longer pay term sales by raising prices to finance your cash flow needs.
• Study the ratios that your bank requires in your line of credit agreement. Adjust assets and expenses to fit these requirements.
  • Can you time your sales between quarters to smooth performance?
  • Update inventory counts. Look for uncounted inventory.
  • Look at your equipment. Have you been expensing or depreciating it? Shifting big items to a depreciated basis can benefit cash flow statements.
  • Once you’ve gathered this information, see if your accountant can update or restate recent statements. You may be able to generate enough impact to go back to your current bank or approach a new bank to secure a larger credit line.

Key Words: Cash-Flow, Bank, Credit Line, Payments, Payables, Vendors, Early-Pay Terms, Terms, Inventory, Depreciation  [like]