When it comes to managing your small business’s assets, the struggle is real. From late-paying clients to natural disasters, there are literally dozens of factors that can easily interfere with your business’s cash flow. But, although you can’t anticipate every single problem that comes your way, you can certainly diminish their impact on your finances. Gene Marks and his guest, Steve Jones, provide practical strategies for regulating your small business’s cash flow.

Executive Summary

1:22—Today’s Topic: How Do I Ensure a Steady Cash Flow for My Small Business?

2:09—Small business owners are encouraged to use either an app or software system to collect receivables and ensure that they get paid in a timely manner. Inefficient billing practices can also undermine professionalism.

4:36—Accepting payment in all forms, including credit card purchases, can help contribute to the stability of your business’s cash flow.

5:44—Outsourcing your collections to an agency is another way to make sure that you get paid, especially if you don’t have the time or temperament to do it yourself.

7:32—It is worth investing in some type of catastrophe insurance since there are certain policies that will protect your business’s cash flow in the event of a shutdown. You should also consider payroll billing, which allows you to collects money in real time and prevents you from overspending on workers comp.

10:53—When working with suppliers, be sure to explore all your financing options since these can either hinder or help your current cash flow. Ultimately, it boils down to finding an arrangement that suits your specific business.

12:41—Establishing a strong relationship with your bank or bookkeeper is critical to your business’s success because they can provide you with an honest assessment of your financial situation via cash reports.

15:27—If you’re not adept at managing your business’s cash flow, you may want to delegate it to another staff member who is more proficient in these matters.

19:34—As a small business owner, you need to be so familiar with your budget and finances that you can immediately tell if something is off.


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Gene: Hi everybody and welcome to The Hartford Small Biz Ahead podcast. My name is Gene Marks. Elizabeth is taking the day off. Steve Jones is my guest today. He’s the CMO of small commercial here at The Hartford. Steve, it looks like Elizabeth is slacking. She’s taking a few days off. We’re going to have to have a talk with her.

Steve: Not at all surprised.

Gene: Yeah, not at all surprised. Right?

Gene: You see we know her well. So this is not news to us. We’re looking forward to Elizabeth coming back soon. We’re also looking forward to our talk which this episode we’re going to be talking about cash flow in your small business and some tips and some thoughts on how to improve it and things to do that you can increase your cash flow. So look forward to you joining us. We’re going to take a quick break to hear from our sponsor The Hartford and we’ll be back in a minute.

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This podcast is brought to you by The Hartford. When the unexpected strikes, The Hartford strikes back for over 1 million small business customers with property, liability and worker’s compensation insurance, check out The Hartford’s small business insurance at TheHartford.com.

QUESTION: How Do I Manage My Small Business’s Finances?

Hello and welcome back. So Steve, I’m glad to have you here with me. Again, Steve Jones is the chief marketing officer of small commercial at The Hartford. Steve, you deal with hundreds … no, a million small businesses here at The Hartford and I’m sure you see plenty. Look it’s in your vested interest that your customers have good cash flow because you want them to stay customers for a long time. So I’m sure you and your agents find yourself in positions where you can give advice or make some … chime in on some things that might help business owners with cash flow. You’ve seen businesses that have done a good job and maybe not so good a job.

So I’m going to throw out a few topics related to cash flow, and I’m just curious to hear your thoughts on that. So the first has to do with collecting receivables for a business. Okay. You told me in a previous episode that your wife is a small business owner. So I’m sure she deals with some receivables and issues as well. Give me some of your thoughts on collecting receivables.

Steve: So first of all, as you would imagine we talk to a lot of small business owners. They’re all over the place.

Gene: Yes.

Steve: There’s a whole continuum of how they approach these things.

Gene: I like the people that are like do the work and then they don’t bill for 90 days later or something. Right?

Steve: It’s a great example and I have one of those. You have these folks who wing it and then you have the highly, highly regimented, technology driven receivables types. I’d like to say that I would probably be one of those highly regimented but I would not be. I would probably be one of those wing it types.

Gene: Goodness.

Steve: It is a massive mistake. Some people can juggle it and make it work but if you’re not on top of it and thinking about how you get your billing out and how you get your money in, it is the reason you’re in business.

Gene: Right.

Steve: The horror stories that I’ve heard across the board are awful. But here’s the other side of that. There’s an anxiety that’s created in the kind of “wing it” receivables in the “wing it” billing type on the customer’s side. It sends a fairly bad signal. I’ve heard this too because I talk to customers of small businesses and small businesses to a customer who feels like, “I don’t have a lot of faith in the services being provided because I don’t feel like I’m paying for them the way I should be. If they can’t stay on top of that and I’m having to chase them to pay them, what are they doing with my business?”

Gene: It really does call into question the operations of your own business and customers look at that stuff.

Steve: I would say these days there are so many systems and software and apps that can help you with this. I’m not just talking about the point of sales systems but just accounting systems and bookkeeping systems that are really good and pretty intuitive. Depending on what you want them for, they can cover an awful lot of your business that you really need to plug into one.

Gene: Credit cards in your business?

Steve: Yeah. So-

Gene: They’re expensive.

Steve: They’re expensive and it’s a … The expense is something that even The Hartford has to deal with when you think about how we do billing. It is but I’ll tell you I think that the science is pretty specific that allowing credit cards in your store actually does increase sales and customers. I think for most businesses it makes sense to do it. I think also these days there are integrated point of sales systems and front end systems, merchant systems that can actually make running your business easier and allowing credit cards is just one part of that.

Gene: Yeah, I have a lot of thoughts on credit cards. We talked about … Elizabeth and I in the past, some of my pet peeves about credit cards. But it is expensive for a business but it’s not necessarily you have to take it for all. I mean in my business we will accept credit cards, but for any bills over $1000 bucks we actually charge an additional fee and that’s not uncommon.

Steve: No. Not at all.

Gene: People do that as well. It’s another thing to consider. How about outsourcing your collections? You talked about you get into these … collecting receivables. Some people take it more seriously than others. Do you have thoughts on that?

Steve: Yeah. Let’s think for a second about … When we’re talking small commercial here at The Hartford, we’re talking pretty small businesses. If you’re out and you’re listening and you think, “The Hartford is too big for me,” we’re not. We really do focus on very small, oftentimes, under 10 employees, under five employees, no employees. So really, really small businesses.

Gene: Right.

Steve: Depending on how big you are is going to depend on can you handle the collections area yourself. Two things on this that I’ve heard small business owners talk about. There is a preference to outsource it despite the fees that it takes for two reasons. One, I don’t have time. Two, I don’t have the temperament.

Gene: Right. That’s me.

Steve: That would be me. And you’re either going to let that money go because you don’t have the temperament or the time or you’re going to outsource it. One caution that I throw out even on outsourcing it, it’s still a representation of you, your company, your brand. There are a lot of bad stories about the way people go about collecting that ultimately reflects poorly on you. But as a business person if you do not value your time and if you do not respect what it means to get paid, you’re not going to be in business long. You have a right to collect what’s due to you. I think that often means outsourcing collections.

Gene: You talk about temperament. For me, it was emotional. You do the work and you bill it and the person’s not paying and you … Ever since I outsourced that … I have my bookkeeper do all that for me. I can focus on what I do, what I do best. We were talking earlier before the show and I was not … I was not understanding what the point was-

Steve: That happens a lot of times with me.

Gene: The not understanding part came from about insurance actually. So this is your job, and you had mentioned about insurance being able to help people save money or improve their cash flow. What does that mean?

Steve: Yeah. So right now everyone’s rolling their eyes listening to this. This insurance company’s going to tell me how insurance saves me money?

Gene: I’m fascinated to hear this. Carry on.

Steve: There really are two reasons. I’ll give one that’s more the mission, if I could say that, about insurance. It really is supposed to be there. If you’re self insuring and something happens, the scope of that can be massive enough to actually put you out of business. It happens with enough frequency that you need to think about what insurance can offer. One of the under looked parts I think, especially, of business insurance, even small business insurance, is the business income side of it. There’s an aspect of some small business insurance policies that most people don’t think about. If something happens that causes your business to have to shut down, either something on premises or off in many cases, say the power is out caused by something outside of your business, some policies will allow you to be protected for the income that you lose during that time. There’s no other way that you’re going to get that. That kind of thing happens with a lot of frequency.

Gene: Sure.

Steve: The idea of your place burning down or you being robbed blind might not feel like that ever happens. Trust me, it does. But there are a lot of occurrences that take place that would put you in a position to lose some of your business income and that’s one of the most important things. The second one and this is the part where nobody should roll their eyes. Please I’m begging you not to.

Gene: We’re not on video. It’s okay. They can’t see me.

Steve: But if you have worker’s comp … So if you have employees and in most states you got to have worker’s compensation insurance. A company like The Hartford offers something. It’s called payroll billing. It is a way to manage your cash flow as … What happens with worker’s compensation insurance … I’m going to try and get through this in 20 seconds because everyone’s hitting fast forward. But what happens with worker’s compensation insurance … and every year every insurance company performs an audit-

Gene: Right.

Steve: … to be sure that you have the right number of employees that we’re insuring and then you got to true it up. The way a payroll billing works is you don’t put a down payment down and it’s actually real time collecting off of your payroll system.

Gene: So instead of making an estimate, paying it in so … and that’s cash that’s going out and then not finding out until a year later whether that estimate was right or wrong-

Steve: Right.

Gene: This is a real time just … It is right every single time.

Steve: It’s right every time. That means that your cash flow isn’t spiking. It is a smooth experience and it saves you time. Most of your payroll systems, your payroll software companies, can offer it via an insurance product like something The Hartford has. So that’s my insurance pitch about how it saves you money.

Gene: It actually makes a lot of sense.

Steve: If you just remember the payroll billing. Just ask your agent about it.

Gene: Right.

Steve: It’s really, really … I cannot … If I were to tell you the number of people who don’t use it is mind boggling.

Gene: Fine. Well at risk of losing the last three people that are listening to this podcast right now-

Steve: Right. Let’s bring them all back now. We’re going to talk about the food.

Gene: No, I was actually going to add though it’s not unlike the whole tax refund argument where people … They pay in their estimates and it’s based on an estimated … Then they have to wait an entire year to find out that we underpaid or overpaid.

Steve: Yeah.

Gene: Why even have to go through that if you can just have a system where the right amount gets paid in.

Steve: Right.

Gene: So that’s important. Okay. Good. Cash flow, we’re still on this topic now. We’ve talked about collecting receivables and your customers. We talked about using insurance to actually help manage your cash flow better. Let’s talk about suppliers. Okay. When you hear small business owners they like to extend payments to suppliers or go to their suppliers for financing or they try to negotiate different terms. What are your thoughts on using suppliers to help your cash flow?

Steve: Yeah. So I’ve heard both sides of this. I’ve heard the good and the bad from both. I do feel like it tends to be a little bit more business specific for what kinds of suppliers it makes sense to do that. It always comes down to this. Your reliance on your supplier for whatever it is that you’re getting is something that is largely out of your control. The financing arrangements that can come from there can be just as tricky in my experience with listening to small business owners talk about it. I believe that there are a lot of good financing options that are out there that are probably better than looking up the supply chain. I’ve just heard a lot of bad stories.

Gene: Fair enough. Your bankers, is it important to have a bank if you’re a business? Your wife’s a business owner.

Steve: Right.

Gene: We were talking about this in a previous episode but how big is … if I can ask, how many employees or about-

Steve: She’s got eight employees.

Gene: Okay. Perfect. Because I got 10. Does she have a relationship with a bank or does she not need one?

Steve: She does have a relationship with a bank. For her the type of business she’s in, she’s not relying on inventory or suppliers in that sense. But those folks that she works with, the bank, is very important and how she manages her total business. The bank for her is a partner in that. The systems that they offer for her to understand how her business is doing and how she links it to her bookkeeping is critical. So she has a relationship. I would say the order of importance of my wife’s relationships related to her business goes probably something like this. Her bookkeeper, number one.

Gene: Number one priority person.

Steve: Absolute number one, true partner and just wholly and fully reliant.

Gene: Is her bookkeeper an employee or an outside …

Steve: Outside.

Gene: Outside person.

Steve: Outside.

Gene: And does this bookkeeper provide her with reports-

Steve: Correct.

Gene: Every month, every week, every day?

Steve: Weekly.

Gene: Weekly.

Steve: And it’s the most critical thing she’s got.

Gene: Yeah. I get a weekly cash report. We call it a flash report. We do it weekly. It’s showing cash receivables, payables and back log. I get it Monday morning and I wake up waiting for that to come from my bookkeeper. Right?

Steve: That’s how my wife works through it. To her-

Gene: Yeah. I need to meet her.

Steve: Right. For her it is about her cash flow and monitoring what’s happening and what she can afford next.

Gene: Yes.

Steve: That’s why it’s so important to her. This business for her is just a couple years old. It’s very healthy and she has a lot of things she wants to do and she’s waiting for certain triggers to do that and that cash flow view is most important.

Her second most important relationship is her accountant, different than the bookkeeper, but her accountant is the second.

Gene: I like this woman.

Steve: Right. Then for after that it’s probably her employer attorney.

Gene: Got it.

Steve: Those things start to matter.

Gene: So you’re not even in the top four.

Steve: I doubt I’m in the top 20. I’d like to think that I am but no, not so much. But for her the relationship she has with her bank … This is what she wants from them. She does get some advice from them, which is important, but she really relies on her bookkeeper mostly for those things. It is the stability of the systems that she works with and her ability to access and move her cash around. That’s what she values in that relationship.

Gene: Got it.

Steve: That is less a person and more the institution itself.

Gene: Got it. Now you’re not a small business owner but you … you’re an executive that manages a department of people. You have a budget that I’m assuming you have to adhere to. So you are managing cash. How do you manage your cash in your department?

Steve: Two things. One, I have a person in my department that I rely on more than myself. I think one of the great skills that everybody should have is what am I honestly, truly good at and what am I honestly truly not.

Gene: And not to interrupt you but it is … and I don’t even want to hear it from people saying they can’t afford somebody or they don’t have the … It’s almost life or death-

Steve: You can’t afford not to.

Gene: You can’t afford not to.

Steve: If you are honestly, truly good at it and you can make it work and still do all the things … You should do it. But if you’re honestly, truly not good at something … I have to work to be better all the time at a bunch of things. But I recognize especially when it comes to managing my budget, I’m all over it. But I have a person that I rely on in my department that is just like the Monday morning report for you.

Gene: Yep, yep.

Steve: As long as he’s got his eye on it, I know that things are going well. There is not weakness in understanding that some things you have to rely on others to do. If you cannot trust yourself and trust your people to give those things up, you will burst into flames.

Gene: Do you get a Monday morning report or the equivalent of a weekly-

Steve: I get an equivalent of a weekly and then a monthly thorough review.

Gene: And that is showing what your budget is and what’s been spent under that budget.

Steve: Right.

Gene: Do you have … because a lot of business owners don’t do this and I think it’s important on any level. Do you forecast?

Steve: I do.

Gene: So you got a budget-

Steve: Right.

Gene: … but then you got a forecast. Can you tell me a little bit about that?

Steve: Sure. Even when you think about it across the board for our business, forecasting is … I say I’m a marketer. In a lot of ways I’m probably a forecaster. You’re either trying to forecast what the business is going to do, what you’re going to get from it or you are forecasting, you’re outlooking we call it, what your budget’s going to do. So what is my spending and where do I think it’s going to go? We have a pretty detailed process for that. We have a financial controls group who does … drives most of that process and we have to adhere to it. If I’m a small business owner I may not have that. But the practice of relying on systems and software that exist to monitor your cash flows, relying on the experts around you, your bookkeeper or your accountant to be sure those things are healthy so that you truly understand where you stand as a business is just as important.

Gene: Right.

Steve: You do not have a financial controls department. But you can get yourself the systems and software and the people around you can help you do it. It’s critical. I couldn’t run my department without it. I wouldn’t be employed very long. Understanding the health of your business as a small business owner has got to be the most important thing. You probably didn’t go to school for it. Don’t mess around with it. Lots of systems can help you and lots of people around you, you can rely on.

Gene: Do you have much financial background yourself as a marketer?

Steve: So I went to a state school and got a journalism degree.

Gene: Wow.

Steve: I took a statistics course.

Gene: Okay. C- for me.

Steve: Right. I think that’s probably what I got.

Gene: Yeah.

Steve: I use numbers now every day. But here’s my … The first out of college job I had required me to be better with numbers. Maybe I had claimed to be pretty good and it required me to be as good as I claimed to be. Does that makes sense?

Gene: A little bit.

Steve: I stretched the truth about my mathematical acumen and got a job. But it required me to learn a lot and I still use that every day.

Gene: Right.

Steve: All of the numbers that I use, which I look back on my journalism upbringing and my musical theater upbringing, I’d be stunned to know now what I can do and how reliant I am on numbers more than anything.

Gene: Sure. I think it’s telling even at this company that Kathy Bromage is your chief marketing officer. Right?

Steve: Yeah.

Gene: She’s a CPA.

Steve: Right.

Gene: It says a lot that even in the … This is marketers, let alone a business owner, you have to know your numbers.

Steve: Right.

Gene: Do you get surprised very often at your budget and your forecast or is it not that often?

Steve: No, I’d say there’s always something. Maybe not at the weekly review but the monthly deep dives there’s always something where I’m like-

Gene: That doesn’t make sense. What happened here?

Steve: Then you got to figure it out. Is it something that’s just being misreported or did it not get picked up? There’s always a mystery to unravel. A basic understanding of math you got to have it to be able to kind of forensically figure out what the heck is wrong with the numbers you’re looking at all the time, all the time. But it says a couple of things. You’re familiar as a small business owner with your … the thing, the good or service that you produce.

Gene: Right.

Steve: You can tell if it’s off by a millimeter.

Gene: Right.

Steve: If you’re not as comfortable with understanding the health of your business to that same degree you got to get yourself some help because you should be able to look at it. I’m a journalism degree guy but when I look at my budget and it’s off by a little bit, it reads like sheet music to me. When I look at it, I can see it. If you’re not feeling that with your own business numbers and you’re not relying on somebody else to read the sheet music for you, you better get on it.

Gene: Yeah. The smartest business owners I know, Steve, are … you can’t eliminate surprises. But when it comes to managing your cash it’s … you forecast. You budget where you can, so that you know what’s going to happen at least in the next 60 to 90, 120 days. Otherwise, you can get into trouble if things sneak up on you.

Steve: No doubt.

Gene: Steve, thank you very much. This is Steve Jones, chief marketing officer of small commercial at The Hartford. You’ve been listening to Small Biz Ahead podcast. My name is Gene Marks. We hope you have enjoyed the conversation and we hope that you increase your cash flow very much so. Speak to you soon.

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