Earn cash make money online

Managing cash flow to improve your bottom line: Making your money work harder for you - Office Management

Cash flow--the movement of money into and out of a business-is an easy enough concept to understand. But not all podiatric professionals are fully aware of the impact it has on the bottom-line. That's because the importance of cash management is far easier to recognize in some types of business situations than it is in others.

Take home building, for example. When a builder takes on hundreds of thousands of dollars in short-term debt in order to build some new homes, it's quite obvious that he must generate substantial positive cash flow in a hurry if the business is to survive.

Although every situation is not that dramatic, generating and managing cash flow is important in even the smallest podiatric practice. Losing control of money has generated more headaches for medical practitioners than temporary anemic figures on the bottom line. On the other hand, a sensible cash management system can provide a life-sustaining cushion during those inevitable slow times when the phone just isn't ringing and the patients aren't streaming in.

Once you accept the importance of controlling cash flow, you'll find it easier to stick to the rules of good cash management. Here are nine powerful techniques for improving cash flow in your practice:

1. Never allow ANY of your money to lie idle. If you don't already have one, open a money market account at your bank and have it linked to your checking account for telephone or online transfers. Deposit daily receipts into the money market account where they will immediately start drawing interest.

NEVER deposit receipts directly into your checking account. Keep a minimum balance in the checking account and transfer cash as needed to cover checks written. "That's exactly what I do," says Ronald Renzi, DPM. "I want my money drawing interest right away.

Worst sin of all: leaving checks lying around in a desk drawer until you can get to the bank. Use every cent of your money to make money.

That's the mark of professional cash management.

2. Don't be timid about using other people's money. We've all heard stories about professionals who have built large, successful practices without ever borrowing a cent, but they are clearly the exceptions. At today's extraordinarily low interest rates, careful use of credit is one of the most effective practice-building tools.

Personally, I've never been comfortable with extensive use of credit for personal affairs. When it comes to business, though, it's a different matter. To begin with, the costs of borrowing are legitimate tax deductions for professional practices. It makes more sense to spread out the cost of your capital purchases than to put stress on your cash flow by laying out large amounts of cash that could be used more profitably within your practice.

3. Consider leasing. Leasing products like cars for personal use is not a good idea. Most accountants agree that leasing is the most expensive way to maintain a personal car.

But business is a different animal entirely. The nature of business accounting is such that leasing can be the most sensible approach to many types of capital investment. And it always makes sense to lease if you will be able to use the cash in your practice to earn a better return than the cost of leasing.

"I've never leased any equipment," says Dr. Renzi. "When I started my practice, I was advised to just take out a loan to pay for what I needed. If I had known more about leasing at that time, I would have considered it."

Talk to your tax advisor about leasing the next time you are considering a large capital purchase.

4. Spread the gospel. To manage cash, you've got to have a steady flow of the stuff coming in. As long as it's in good taste, there's no reason to be reluctant to advertise your services. As is the case with any business, marketing is a critical element to growth. Philadelphia podiatrist Howard Goldhammer says, "If you don't think you're good, no one else will. You have to tell your story."

Dr. Goldhammer has had success in such marketing techniques as addressing seniors groups and using "wall" advertising in suitable locations such as local gyms and sports centers.

Dr. Renzi has also spoken to seniors groups but he hasn't tried wall advertising. "It sounds like a good idea," he says. "I'd be willing to try it."

Dr. Leonard Portnoy agrees. "So far, I've limited my marketing to speaking to seniors groups, but I see no problem with other marketing techniques, so long as they are done in good taste."

5. Don't be in a big hurry to pay your bills. There's a good reason why checks are slow to come in from your accounts receivable: Hanging on to your cash as long as possible keeps that money available to draw interest or to work in your practice.

Take the time to set up a system that provides for paying bills only when they are due. It's easy to do and is another rung on the ladder of professional cash management. But don't go overboard and jeopardize your credit standing by paying bills late. Pay your bills when they are due--not before, not after.

And keep an eye on the state of postal deliveries during this uncertain time. If it appears that deliveries may be delayed, allow a little extra time to make sure your payment arrives in time to avoid those oppressive late-payment fees.

6. Be aggressive about collecting accounts receivable. Never allow your accounts receivable to go untended. You've earned that money; you have a right to it; you need it. If your patients learn that you are cavalier about money owed to you, you can be certain they will stretch your patience (and your cash flow) to the limit.

7. Maintain a cash cushion. Whenever possible, keep enough cash in interest-bearing business accounts to cover normal operating expenses for three to six months. There is nothing like the peace of mind and self-confidence that comes when you don't have to sweat out next months' office rent or payroll during a slow spell. And remember: your cushion money is making money for you in those interest-bearing accounts.

8. Develop a personal relationship with your banker. Handling money is a banker's job, and most are very good at it. Even if your practice is tiny, it's a good idea to have a personal relationship at the bank where you do business. Discuss your financial picture with your banker. You'll get some good ideas and a favorable ear should you ever need a little financial help.

9. Let your computer help you manage your cash flow. Whether you use a commercial software package such as Medisoft, or a PC with one of the popular financial programs such as Money or Quicken, learn to trust every aspect of your business affairs, including investments, to your computer. The financial reports and analyses that modern software can produce at the touch of a button can be vitally important tools for improving cash flow and bottom-line profits.

Even if your practice is large enough to farm out your record keeping, consider putting your finances into one of the popular software packages designed for small business and personal finance. They are infinitely easier to use than they were as recently as a couple of years ago, and they will teach you in dramatic fashion how much you can benefit from a sensible system for managing cash flow.

Bill Lynott is a management consultant, author and lecturer who writes on business and financial topics for a number of publications. His latest book, Money: How to Make the Most of What You've Got, is available through any bookstore.