Good cash flow buoys the bottom line

You probably didn't start your small business because you wanted the chance to master accounts receivable.

Yet as any business owner knows, keeping the doors open requires getting paid for the work done or product sold.

It's more important than ever, given the state of the economy. So why are so many small-business owners behind on sending out invoices or collecting what they are owed?

"People starting a business don't realize what they are really getting into," said Mike Culver, principal of H.L. Mike Culver CPA in San Diego. "It's not just doing the job you like to do. It's also all the rest of the ancillary stuff like billing and collecting the money."

The fact that too many small businesses are undercapitalized -- often from the start -- makes the situation worse, he said.

"That's why the failure rate of small businesses is so high," said Culver, who started his two-person firm in 1982. It took five years before his business started to make "decent money," he said.

Lightfoot Planning Group in Carlsbad enjoys good cash flow because billing isn't an afterthought, said Lou Lightfoot, who owns the 23-person land-use planning and landscape architecture business with his wife, Lynne.

The 30-year-old company's projects include land-use master planning for the 2,000-acre Rancho del Oro community in Oceanside and the Franciscan order's 200-year-old Mission San Luis Rey, also in Oceanside.

"We manage our accounts receivable and make sure our clients understand that we expect to be paid," Lou Lightfoot said.

That may seem like a tall order for the many small-business owners who feel overwhelmed just trying to get the work or the product out the door. Most are far too small to have a dedicated accounts receivable person or other credit management professional on staff.

Though many rely on small-business accounting software such as QuickBooks or Peachtree, that doesn't ensure that billing information is entered promptly, invoices are mailed regularly and overdue accounts are contacted quickly.

Outside bookkeepers can be a big help, but finding a qualified, reliable one is a challenge for some firms. Accountants can be too expensive for the smallest operations to use regularly for billing.

Despite the potential hurdles, as the owner of a small business it is your job to keep the cash flowing.

It's not a complicated task for most small firms but it requires determination and follow through. The reward is having enough money to run and expand your business.