Bootstrapping: Internal Sources of
Funds
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 do the job you
were going to buy that Pentium II for?
A little frugality and sensible use of available resources will pay big
dividends in the long run. The old cliché "watch the pennies and the
dollars will take care of themselves" is the bootstrapper's fight song.