Cash Flow Scorecard 1: How do you get paid?

Posted 01 August by Barb Easter in Accounting, Bookkeeping, Cash Flow, Entrepreneur, Small Business, Tools and Resources, Videos

Here’s another segment of our ongoing Cash Flow Scorecard video series designed to help accountants, bookkeepers and their business clients delve into what could harm the business’ cash flow. In today’s video, Barb and Blaine discuss how you get paid – or don’t – can affect your cash flow risk in more than the obvious ways.

Download Dryrun’s free PDF Cash Flow Scorecard to use for yourself and start the discussion with your clients.

Watch all 10 videos:

Cash Flow Scorecard 1: How do you get paid?

Cash Flow Scorecard 2: How big are your individual sales?

Cash Flow Scorecard 3: How often do you get paid late?

Cash Flow Scorecard 4: How large is your monthly budget?

Cash Flow Scorecard 5: How do you pay your largest expenses?

Cash Flow Scorecard 6: How often do you pay your bills past the due date?

Cash Flow Scorecard 7: How fast are you growing?

Cash Flow Scorecard 8: How do you fund expansion?

Cash Flow Scorecard 9: How big are your savings?

Cash Flow Scorecard 10: Have you ever missed paying yourself?

Transcription:

Hi Everyone,

This is Blaine and Barb with dryrun.

Today we are going to talk about some of the factors that we have on our cashflow scorecard. You can actually download the scorecard on our site, work your way through and it’s going to give you a bit of an idea of how at risk your company is for cashflow issues.

One of those issues on that scorecard is:

How you get paid.

It is really talking about, do you get paid with a bunch of small purchases or larger, fewer purchases.

Barb:

Just to clarify Blaine, are we talking about number of customers or clients or are we talking about number of transactions?

Blaine:

In this case we are talking about the number of transactions.

Now, they usually relate in some way, the number of clients, the number of customers you have. But this is specifically about transactions.

So do you have a lot of small cash transactions, it could be a small number of customers that are buying….you know, your regulars in your coffee shop that are buying 5 dollar coffee ever single day and paying you cash.

That’s the one end of the spectrum. You are getting cash and you are getting a lot of small purchases. If one of them doesn’t show up one day, you are not out a whole pile of money.

On the other end of the spectrum, are big invoices. Are you charging usually fewer clients, but larger invoices that you are sending out so it’s a large purchase.

The reason that I mention invoice is that when you send an invoice you have to await payment.

Barb:

Ok, I think that is a critical difference. We are going to touch on later.

So, when I hear one customer or client that might be responsible for multiple transactions, a coffee shop is a great example, do you have any other great examples before we tie this one off?

Blaine:

Well, on the other side a typical, the invoice model is typically like web design firms, big construction companies, you know all kinds of project based businesses.

They have particular levels of a project or sometimes it will be just one big payment which we don’t recommend, they’ll send out an invoice then they await payment.

Now of course there are terms and all sorts of things involved, we’ll talk about that in some other factors on the scorecard, but this is the one thing we are dealing with today, is a whole bunch of small cash transactions versus fewer, larger invoiced transactions.

Barb:

So, just to clarify before we wrap it up, if you were to make or have a number of larger transactions, that’s almost like the bigger they are, the harder they fall mentality.

It might not be the defining factor of your risk but it might be an important factor as you go through to evaluate your risk on the scorecard.

So download the cashflow scorecard anytime, it is free, mail one to your mom or friend or colleagues, and we look forward to dissecting the rest of these over the upcoming days and weeks.

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