February 1, 2010

Bootstrapping: Internal Sources of Funds


Hostway Team

By Winmark Business Solutions
Bootstrapping is a buzzword that basically means generating needed funds by deftly managing your cash inflows and outflows. Improving cash flow should be a daily task, like housekeeping.
Monitoring, forecasting, and analyzing cash flows is essential to liquidity and profitability, even for the Fortune 500 crowd. A basic list of areas of concentration would include:

  • Collection of accounts receivable — Can credit terms or collection procedures be improved? How about billing cycles and/or cash discount incentives?
  • Inventory management — Do you really need all that inventory? It ties up cash, takes up expensive space, ups insurance costs, and often "shrinks" so if you don't absolutely need it for immediate shipping or manufacturing purposes, keep it lean and mean.
  • Accounts payable cycle — Vendors make good financiers. If they offer 30 days to pay, take 30 days and think about asking for 45. Set up a system to take advantage of early payment discounts too.
  • Expense control — Make every dollar count. Do you really need to rent that expensive postage meter or can you just buy self-stick stamps for awhile? Does your company van need to be washed at the fancy place down the block or can you spare a little time to do it yourself on the weekend? Thrift applies to fixed assets, too. Will a used computer, purchased off-lease, do the job you were going to buy that an expensive, leading edge PC for?

A little frugality and sensible use of available resources will pay big dividends in the long run. The old cliche "watch the pennies and the dollars will take care of themselves" is the bootstrapper's fight song.

About the Author

Winmark Business Solutions (WBS) is a free Web site for small businesses and entrepreneurs containing over 6,000 pages of business-critical information and downloadable tools at www.WBSonline.com. WBS is a division of Winmark Corporation, a multi-brand franchisor with nearly 900 franchise locations in North America. With over 25 years working with small businesses, WBS draws upon years of experience to bring important small business articles, information, tools, forms, checklists, calculators and downloadable forms to the small business owner to help their business grow. WBS contains over 6000 pages of business-critical information all available at www.WBSonline.com.

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