Charles Leikauf shares three ways product businesses can fix cash flow problems: get a line of credit at 8-14% interest, renegotiate supplier terms to 15 or 30 days, and build a monthly cash-flow forecast to track money in and out.
And then there's payment terms for inventory. Bring me to number 3, which is cash flow. So how do you fix cash flow problems? There's 3 ways. A couple of things that I like is a line of credit here. That's from your bank or it's a credit card. So line of credit, and then there's payment terms, and then there's a good forecast/budget. So line of credit here, you can go to your bank and get a 10, 12, 14% line of credit, sometimes cheaper, right? Depending upon the time. If you look at this video in a later time, interest rates may have changed., but you only pay on the amount that you're currently using, not on the whole line. So if you go get a $250,000 line of credit, but you're only using $100 grand, you're only gonna pay 8, 12, 10, 10% interest. And as soon as you pay it off, it's gone. Two is payment terms. If you pay all of your suppliers immediately, we'll go back and call all of them and say, hey, can I pay you guys in 15 days when I make an order? Can I pay you in 30 days when I make an order? And the third is, do you have a forecasted cash flow? Do you know how much is coming in every month? Do you know how much is going out and how are you planning for that? So these have been 3 ways that we can optimize the business. If you want to learn more about all the stuff we put together, go check me out at ProfitSearchGroup.com where we have all of our information on financial training, how to do this for clients, and including our fractional CFO certification.
