March '20

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rv-pro.com March 2020 • RV PRO • 103 • How much cash does the business have? • How much cash does the business need in order to operate – and when is it needed? • Where does the business get its cash and spend it? • How does the operation's income and expenses affect the amount of cash needed to operate the business? The 'In' of Cash Flow In a perfect world, there would be a cash inflow – usually from a cash sale – every time there is an outflow of cash. Unfortunately, this occurs very rarely in an imperfect business world. Thus, the need to manage the cash inflows and outflows of the business. Obviously, accelerating cash inflows improves overall cash flow. After all, the quicker cash can be collected, the faster the business can spend it. Put another way, accelerating cash flow allows a business to pay its own bills and obligations on time – or even earlier than required. It also may allow the business to take advantage of trade discounts offered by suppliers. An important key to improving the RV operation's cash flow is often as simple as delaying all outflows of cash as long as possible. Naturally, the operation must meet its outflow obligations on time, but delaying cash outflows makes it pos- sible to maximize the benefits of each dollar in the operation's own cash flow. Outflow Outflows are the movement of money out of the business, usually as the result of paying expenses. If the business involves reselling goods, the largest outflow will most likely be for the purchase of inventory. A manufacturing business's biggest out- flow most likely involves the purchase of raw materials and other components needed for the manufacturing process. Purchasing fixed assets, paying back loans and paying the operation's bills are all cash outflows. An RV business professional can regain control over his oper- ation's finances by adopting best practices and proper tools for invoicing. A good first step involves how the operation pays its bills. Many credit cards have a cash-back bonus program. Even if the program offers only 1 percent cash back, that could equate to a sizeable monthly amount for many RV dealers, suppliers, distributors and manufacturers. Of course, because credit cards tend to have a higher interest rate, they should only be used if the balance can be quickly paid off in full. Improving the invoicing process is another key step in cash- flow management. A business can adopt incentive strategies to be paid faster. A business enjoying a 10 percent gross margin on parts and supplies that offers a 2 percent rebate in exchange for early payments might not be appropriate. Giving away small extra services, on the other hand, might work. Incentives might include the following: • Small additional services Cool It Mat RV PRO MAGAZINE Mar 2020 COOL-IT MAT TRIM & APPLY (800) 274-8437 www.ThermoTec.com Also available at: REFLECTS RADIANT HEAT TEMPS UP TO 2000˚ Enter code RVPRO20 to receive 20% off your order at ThermoTec.com Keep the Engine Heat OUT! TM WAT ATER FILTERS ER FILTERS Freshwater has never been SO REFRESHING! • High Quality • Interchangeable • Full line for all your filtration needs

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