SCORE Small Business Blog

Finance: The 3 C's of Cash

As an entrepreneur, your cash flow and cash position are paramount.

Collect Cash

Deposits. If you bill for services, collect a deposit of 33 percent to 50 percent up front. Who does this? Landscapers, interior decorators and consultants. Call it a deposit or call it a retainer, but collect it.

Payments. Send out invoices promptly mark “pay upon receipt” or “net 15.” As an entrepreneur, you want to get the payment, which you are owed, quickly. With these terms you can begin collections follow-up in 15-30 days, instead of 30-60 days.

Conserve Cash

Watch Your Budget.Watch the dollars. Watch the $50s. Watch the $100s. The extra purchase of office supplies, the added of another mobile phone in your network, the money you spent that was not on a budgeted item, blows the budget. The gasoline that gets used because of three separate trips in three days instead of one roundtrip to three stops–that’s where the money goes–overhead costs.

Stick to your budget. If you start drifting over budget, then look for somewhere else to cut next month. It’s discipline and looking at the numbers that keep you on track with expenses.

Carry Cash

Carry cash on your budget. Yes, you can have a line item in your budget that’s operating cash reserve. This means you have planned cash to be in the bank, so if your cashflow is slow on collecting payment, you go over budget, or if sales dip–you still have operating cash to keep the business moving forward.

Set a cash floor for your peace of mind. Know your total revenue, total expense and your upcoming sales goals. You have a good sense of your monthly expenses. Before you ever draw on a line of credit, set a floor for how much ready cash you keep on hand to meet expenses.

-Christine Banning, SCORE
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Discussion (5) Comment

  1. ChristineVisitor


    Collecting an upfront fee to increase an entrepreneur’s cash flow and cash position is excellent and smart advice.

    As a consultant, I charge a non-refundable retainer fee at the time my client and I mutually agree upon and sign the service contract. The fee is sufficient enough to cover administrative costs.

    Also, if for some reason, the client decides to terminate the contract, some compensation has been received for your time, supplies, and services rendered.

    Christine Range
    Christine’s Internet Marketing Spot

  2. John:

    Thanks for joining the conversation. Great comment.

    You are so right.

    Set the deposit amount with fixed overhead and job costs in mind.


  3. johnVisitor

    When you ask for the deposit, I suggest it cover your cost of doing business such as supplies, transportation, what you pay employees or contractors to do, permits, etc. This way your expenses are covered. Only your profit from the job is then extended or at risk. Many outdoor workers, like deck bulders, do a booming business just before they go bankrupt. Why? cash flow.


  4. Kerry

    Thanks for the comment. You are right on point, it’s so important to have a cash line item to create that cashflow buffer.

    Appreciate your comment.


  5. Kerry PfrimmerVisitor

    Christine -

    Great highlight piece. We recently conducted a Workshop where this very subject was presented. In particular carrying a line item cash reserve seemed to be overlooked by many small businesses or was accessed all too often.




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