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Businesses learn cash flow tips for hard times

ST. PETE BEACH — The best way to increase cash flow during a down economy is to work harder, often for less money. And don't cut marketing or outside services such as accounting, if possible.

That's the advice about 30 small business owners and employees heard at a recent cash flow seminar sponsored by the Tampa Bay Beaches Chamber of Commerce.

"If you can (maintain marketing) you're going to be far better off than other companies who have stopped marketing," said seminar speaker Tim Price, a certified public accountant since 1983 who has a doctorate and a master's of business administration in finance from the University of South Florida. "The same companies that didn't over-invest (in expansion) in the boom are the same ones who can invest in marketing and advertising now."

When budgets tighten, the market gets fiercely competitive for the customers and clients who are still spending. Lowering prices can steady or even increase cash flow.

Two years ago, Price's firm charged around $10,000 to perform audits for homeowners or condo associations. Now it submits bids closer to $5,000.

"How do you make up for it? You work twice as hard," he said.

Another way to increase cash flow during a down market is to reduce operating costs. The catch is to do so without compromising customer service or quality. That's why the business owner often ends up working more.

Price warned not to cut the most expensive employee if there's a good reason he or she draws the biggest paycheck. "You have to keep your good people even if they cost you more, because in the long run they're cheaper because of their productivity," he said.

When it comes to payroll, business owners should pay employees as infrequently as they can because it takes cash out of the business and takes up time.

"Ideally you'd pay them once a year," Price said, laughing.

On the other hand, billing should be done often. "You want to collect that cash as fast as you can," he said. "It takes up time but it's worth it."

Price is a proponent of monthly cash budgets that should be based on history more than what the marketing department is projecting.

"What's the rule of thumb for everything marketing gives you? Divide by two," he said. That's why he thinks outside professionals remain crucial even in tough markets because when a business is challenged, that's not a good time for somebody who's never done the books, taxes or projections to start winging it. A new business, especially, needs outside professionals because it has no history to use when planning a budget.

Patricia Hubbard, who runs the Friendly Fisherman restaurant in John's Pass Village with her sisters, agreed that their CPA's monthly profit and loss statements are an important tool, even though her family has had the restaurant since 1978.

"He's really good at holding our feet to the fire," she said. "If things aren't going right, you need to know as soon as possible."

Comparing notes with similar businesses through a trade association is another way to make the most of cash flow, said Nancy Karnavicius, owner of Bayprint in St. Petersburg. Five years ago she joined a nationwide group of 100 printers that meets once a year. Everybody shares their financials.

"That's a really good reality check," said Mike McElvogue, the chamber's business assistance program specialist. For example, if a business owner finds his cost of goods is 37 percent and a counterpart's cost of goods is 23 percent, he can get advice, McElvogue said.

Of course, there is always the exception to the rule.

Overhead Surf Shop owner Joe Fala told the crowd he's somehow managed to run a successful business in John's Pass Village without a lot of attention to budget forecasts.

"I wing it. I take it day by day and deal with it," he said. "Every year something different has happened to us: the cold, oil, bridges. I try to prepare for it with anything I can save to take care of anything that comes up."

Reach Katherine Snow Smith at (727) 893-8785 or

Fast facts

Seminar sponsors

The seminar was sponsored by the Tampa Bay Beaches Chamber of Commerce in conjunction with Pinellas County Economic Development's small business development center, which offers courses, seminars and one-on-one counseling at little or no charge. For more information call (727) 453-7200.

Businesses learn cash flow tips for hard times 12/14/10 [Last modified: Tuesday, December 14, 2010 11:22am]
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