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7 Ways to Strengthen Cash Flow in a Middle-Market Company

Improving your cash flow helps your business stay nimble. Here are tips on how to strengthen cash flow.

Middle-market business owners focus much of their time on boosting sales and profits. But there’s another component of business finances that’s just as important as sales and profits: cash flow. If cash flow suffers, it might not matter how high your sales and profits are. Poor cash flow could even bring failure or bankruptcy to a middle-market business. 

Cadence Bank Senior Vice President Susan Teslicko urges owners of middle-market firms to focus on improving their cash flow. Here are her seven tips to help strengthen your company’s cash flow. 


1. Negotiate and take advantage of payment terms offered by your vendors and creditors 

Most vendors allow their customers to pay invoices within a certain number of days after delivery of products or services — for example, within 30 days (or net 30 days). “Negotiate with your vendors for the best payment terms possible,” says Teslicko. 

Once you’ve negotiated terms, structure your accounts payable so that invoices are paid on the due date — and not a day sooner (or later). 

Bank solutions like invoice-to-pay and ACH services can help you automate this process (see tip #5 below). 


2. Limit your debt 

“Always be cognizant of your debt and your cash position,” says Teslicko. “It’s smart to establish a bank line of credit you can tap in a financial emergency, but don’t overextend the company with too much debt. Doing so can lead to the demise of the business.” 


3. Use a corporate card to pay for purchases 

Businesses have long used corporate cards to pay for low-value items like office supplies and travel and entertainment expenses. Today, a growing number of middle-market firms are also using them to buy things like machinery, equipment and raw materials. 

By using a corporate card to pay for such big-ticket items, you’ll enjoy an immediate 45-60 days of free credit and incur no interest if you pay the balance in full when it comes due. You may also rack up rewards points you can use however you wish, such as to pay corporate travel expenses. “Be sure to ask vendors if they charge a fee to accept credit card payments,” says Teslicko. 


4. Open a business savings or money market account 

This is a good place to stash any excess cash balances that accumulate in your business checking account. You may earn a small return on the funds, but the real reason for opening such an account is to have easy access to liquid funds in case you experience a cash flow shortfall. 


5. Use bank resources that can help you collect cash faster 

There are a wide range of bank products and services that can help you improve cash flow management. For example, with receivables lockbox, payments are sent directly to a special post office box monitored by your bank, where they are picked up and immediately deposited and posted to your account. This can speed the posting of your receivables by days or even weeks. 

Teslicko says she recently worked with a middle-market firm to set up receivables lockbox. “This company is reaping big benefits,” she says. “Not only have they improved cash flow, but they are able to reassign accounting employees from manually processing receivables to other more productive tasks that add more value to the business.” 


6. Hire a good CPA 

Teslicko says she sometimes sees companies try to cut corners and only use an accounting software program to handle their business finances. “Middle-market companies need an expert financial and accounting advisor in their corner,” she says. “In particular, look for a good CPA who has knowledge and experience in your specific industry. This can pay big dividends down the road.” 


7. Build a great relationship with your business banker 

The same thinking holds true with regard to your business banker. “You don’t just want a transactional relationship with your banker, nor do you want to work with someone who is just an order-taker,” she says. “You need a banker who understands your business and your industry and will work with you in a consultative manner to help you achieve your goals.” 

Learn about Total Access Banking from Cadence Bank, designed specifically for middle market businesses to provide a discounted, more predictable way to get the combined services you need for day-to-day banking efficiency. 
This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

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