Unlock Hidden Cash from your Balance Sheet

Brent Forbush by Brent Forbush

The most urgent question received from clients on a continuing regular basis is, “I need cash and I have a few big jobs that I am awaiting payment but it doesn’t look like I will get paid before this week’s over—what can I do?” Need cash in a hurry? Here’s how business owners can look to their financial statements to improve cash flow.



Many businesses turn first to their receivables when trying to drum up extra cash. For example, you could take a carrot-and-stick approach to your accounts receivable—offering early bird discounts to new or trustworthy customers while tightening credit policies or employing in-house collections staff to “talk money in the door”. But be careful: Using too much stick could result in a loss of customers, which would obviously do more harm than good. So, don’t rely on amped up collections alone for help. Also consider refining your collection process through measures such as electronic invoicing (our preferred system of choice is Bill.com), employing collections payment process systems by accepting payment on your website, setting up recurring automatic payments where possible via ach or debit/credit cards or requesting upfront payments from customers with questionable credit and using a bank lockbox to speed up cash deposits. During a business’ high growth phase, this cash call can put a significant strain on business that want to grow faster than their sustainable growth rate. Invoice factoring often alleviates these problems. Factoring is the process of selling the businesses’ accounts receivable to a third party who advances funds against payments to be remitted. Typically, a receivable can be sold once goods or services become verifiable with the buyer of the goods or services. This can provide cash to meet payroll, equipment purchases, and cover inventory purchased on short terms. Factoring is a good choice for high growth companies.


The next place to find extra cash is inventory. Keep this account to a minimum to reduce storage, pilferage and security costs. This also helps you keep a closer, more analytical eye on what’s in stock. Monitor inventory turnover ratio, economic order quantities and plan accordingly to put a strain on cash flows with excessive inventory on hand. Have you upgraded your inventory tracking and ordering systems recently? Newer ones, like Fishbowl, can enable you to forecast demand and keep overstocking to a minimum. In appropriate cases, you can even share data with customers and suppliers to make supply and demand estimates more accurate.


With payables, the approach is generally the opposite of how to get cash from receivables. That is, you want to delay the payment process to keep yourself in the best possible cash position. But there’s a possible downside to this strategy: Establishing a reputation as a slow payer can lead to unfavorable payment terms and a compromised credit standing. If this sounds familiar, see whether you need to rebuild your vendors’ trust. The goal is to, indeed, take advantage of deferred payments as a form of interest-free financing while still making those payments within an acceptable period. Is your balance sheet lean? Smooth day-to-day operations require a steady influx of cash. By cutting the “fat” from your working capital accounts, you can generate and deploy liquid cash to maintain your company’s competitive edge and keep it in good standing with stakeholders.

Brent Forbush is the Auditing and Accounting Manager at Forbush and Associates which is a family owned and operated local CPA, accounting and tax preparation professional services firm. For more ideas on how to manage balance sheet items more efficiently, contact forbushandassociates.biz

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