Most business owners see growth as the solution to a cash-flow problem. That’s why they often achieve their goal of growing the business only to find they have increased their cash-flow problems in the process. Plan for growth and the related cash outlays in advance, so they do not come as a surprise. In the meantime, the SBA recommends that you take the following practical steps to better manage cash flow, especially for the growing business:

•Collecting receivables: To speed up the receipt and processing of receivables, the SBA suggests several steps. Spring for a lockbox service, post office boxes serviced by banks so that customers in far flung locations can mail payments there and the checks will be processed by the banks more quickly. Ask customers to preauthorise checks so that banks can draw against their accounts at timed intervals. Centralise your banking at one bank. Ask customers to pay with depository transfer checks, a relatively cheap fund transfer. You can also try offering discounts to customers if they pay bills quickly.

•Tightening credit requirements: Businesses often have to extend credit to customers, particularly when starting out or growing. But you have to do your research beforehand to determine the risk of extending credit to each customer. Can they pay their bills on time? Is their business growing or faltering? Are they having cash-flow problems? Like in the U.S. the SBA recommends getting a Dun & Bradstreet report on potential customers and asking them to fill out a credit application. You should also check references. Another option to extending store credit is to accept credit cards. This will cost you a percentage, generally from 2 to 5 percent of the sale, but it may be a safer bet for getting paid on time.

•Increasing sales: If you need more cash, it seems like a no brainer to go out and try to attract new customers or sell additional goods or services to your existing customers. But this may be easier said than done. New customer acquisition is essential to a growing business, but it can take time and money to convert prospects into sales. Selling more to existing customers is cheaper and you may be able to do this by analysing what they're buying and why - information that may even lead you to increase your profit margin and, hopefully, generate more cash. But the SBA warns businesses to be careful when increasing sales because you may just increase your accounts receivables and not actual cash if these sales are on credit.

•Pricing discounts: One option to increasing cash flow is to offer your customers discounts if they pay early. While this practice may impact your profit margin, it may help your management of cash flow by incentivising customers to make payments earlier than billing cycles typically require. Your company may also take advantage of this with suppliers and others that you owe, but be careful that your early payments of debt don't leave you with a cash flow shortfall.

•Securing loans: Short-term cash flow problems may sometimes necessitate a business taking out a loan from a financial institution. Some possible types are revolving credit lines or equity loans, according to the SBA. Most of the time this type of borrowing accomplishes its goals, although during the financial crisis many banks were canceling credit lines and calling in loans. Another option is a long-term amortised loan which includes interest and principal until the loan is paid off. A loan from the cooperative society or the microfinance banks might be apt for this purpose.

Getting Control of Your Cash Flow

Ask yourself the following two questions to get a sense about whether you have your business' cash flow situation under control:

1. What is my cash balance right now?

2. What do I expect my cash balance to be six months from now?

If you can’t answer these two questions, then strap yourself in for a wild ride. You are on a roller coaster ride that’s about to become really frightening. You don’t have your cash flow under control.

One way to keep that situation under control is by tracking your cash flow results every month to determine if your management is creating the type of cash flow your business needs. This also helps you get better and better at creating cash flow projections you can rely on as you make business decisions about expanding your business and taking care of your existing bills.

Monitor your cash flow regularly. Cut costs. Cash in on assets. Get a business line of credit before you need one. Lease equipment instead of buying it. Stay on top of invoicing. Don't let travel slow your invoicing. Get paid faster by using mobile payment solutions, and you will be fine.

•Lawrence Nwaodu is a small business expert and enterprise consultant, trained in the United Kingdom and the Netherlands, with an MBA in Entrepreneurship from The Management School, University of Liverpool, United Kingdom, and MSc in Finance and Financial Management Services from Rotterdam School of Management, Erasmus University Netherlands. Mr. Nwaodu is the Lead Consultant at IDEAS Exchange Consulting, Lagos. He can be reached via nwaodu.lawrence@hotmail.co.uk (07066375847).

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