A healthy cash flow is an essential part of any successful business—made even more critical in this current economic environment. Some business people claim that a healthy cash flow is even more important than your business's ability to deliver its goods or services! That may be placing a bit too much importance on your cash flow, but consider this—if you fail to satisfy a customer and lose that customer's business, you can always work harder to please the next customer. But, if you fail to have enough cash to pay your suppliers, creditors, or employees, you're out of business! No doubt about it, proper management of your cash flow is vital to making your business successful.
  • Understanding cash flow is the first step in effectively managing your cash flow. There's more to it than it just being a fancy term for the movement of money into, and out of, your business checking account.

  • Your profit is not the same as your cash flow. It's possible to show a healthy profit at the end of the year and yet face a significant money squeeze at various points during the year.

  • Analyzing your cash flow will help you spot some of the problem areas in the cash flow cycle of your business. As in any good analysis, you need to look individually at each of the important components that make up the cash flow cycle to determine if it's a problem area or not.

  • A cash flow budget is a good way of predicting your business's cash flow for the next month, six months, or even the next year. If you aren’t preparing a cash flow projection, now is the time to start. It may be eye opening.
  • Improving your cash flow will, without a doubt, make your business more successful. Accelerating your cash inflows and delaying your cash outflows are key factors for improving and managing your cash flow. The cash flow budget is also a handy tool to use in the improvement and management of your cash flow.

  • Filling your cash flow gaps. From time to time, almost every business experiences the need for more cash than it has. If you find yourself in this position, you may have to borrow money to fill the gap.

  • Handling any cash surplus is just as important as the management of money into and out of your cash flow cycle. With the proper management of your cash flow, you might find yourself with a little extra cash with which you can pay down debt or earn investment income.


Conducting a comprehensive review of your organization’s expense structures can ensure you are as efficient as possible and identify potential cost savings—two important areas of focus in our current economic environment.

One such expense item that has significant potential for cost reduction is shipping and freight, particularly overnight delivery from companies like UPS or FedEx. These carriers’ rates increase annually by 6% or so, but their surcharges have increased in the double-digits over the past few years. A quick glance at your recent invoices may reveal that you’re paying for address corrections and residential and remote delivery surcharges, among other things. Many of these charges can be minimized with direct negotiation and spend management best practices.

We would like to introduce you to a local resource that can assist you in this area. For eighteen years, PA & Associates, Inc. and Richard Palarea have been assisting organizations in minimizing their transportation spend dollar. Their clients report an average savings of 42%—that’s significant. Rich affirms that the management of this cost area consists of two important phases:
  1. Creation of a world-class carrier agreement through RFP and negotiation
  2. Ongoing carrier accountability and invoice audit through software

Feel free to contact Rich and his team at 866-200-7283 or visit their website at www.paaa.com. You can also view their flyer for a brief outline of their key products and a representative listing of their current and past clients.
In need of professional strategic management and financial advisory services, an east coast multi-location food retailer engaged AAG. Rapid growth had left the client feeling operationally inefficient and unsure of its future growth. After performing a methodical Performance Management study, AAG was able to identify opportunities for improvement, recommend and implement actions to address them and, ultimately, help launch the company into its next growth phase. Link to the complete case study to learn more.

The economy contracted at a 3.8 percent annualized pace in the final quarter of 2008, according to the advance estimate of gross domestic product (GDP). While this is the steepest decline in economic activity since 1982, it was much better than most had feared. The biggest drag was consumer spending, subtracting 2.5 percentage points from growth.

Nominal personal consumption expenditures (PCE) fell 8.9 percent on an annualized rate during the quarter—the biggest drop since the inception of the series in 1947. Because prices also fell sharply, as evidenced by the biggest decline in the PCE deflator on record of 5.5 percent, real consumer spending fell at a much more moderate pace of 3.5 percent. Real PCE had never fallen by more than two percent in consecutive quarters during the past six decades.

As consumers hunkered down, businesses also retrenched, with investment in equipment and software posting the largest drop since 1958. The hemorrhaging of American jobs accelerated at a record pace at the end of 2008, bringing the year's total job losses to 2.6 million or the highest level in more than six decades. A sobering U.S. Labor Department jobs report showed the economy lost 524,000 jobs in December and 1.9 million in the year's final four months, after the credit crisis began in September. Things only got worse with the start of 2009 as job cuts announced by U.S. employers more than tripled in January from a year earlier, led by planned cutbacks at retailers following the worst holiday-shopping season in four decades.

Historically, Federal Reserve monetary policies have played a large role in stemming the tide of recession and putting the economy on a path of recovery. But the crisis in financial markets underway for the last year and a half has blunted the impact of traditional monetary policies on aggregate demand. Reductions in the federal funds rate since August 2007 have not led to declines in many important private interest rates, to easier credit availability, or to a boost in equity prices.

Accordingly, the Fed has had to seek other means of providing assistance to the real economy by aggressive use of the tools available to it as the lender of last resort. Now that the federal funds rate has been reduced to essentially zero, operations as the lender of last resort are the instrument the Fed will have to rely on to stimulate aggregate demand.

With the new administration in place, responses from the fiscal policy side are accelerating and are now working their way through Congress. It remains to be seen what the stimulus package will actually look like and what affect it will ultimately have on the economy and when.

Most economic forecasters are now expecting things to get worse before they get better and that an economic upturn will most likely not occur until sometime in 2010.

Protect Your Business against Employee Fraud

Financial fraud and theft have become an increasing threat to many small businesses. Employee theft is surprisingly common and can devastate your business. Consequently, it is worthwhile to put an anti-theft program into place, one which includes internal auditing and monitoring.
  • Always monitor your employees. Screen new hires carefully and train them accordingly. Separate accounting responsibilities, making payables and receivables processing different work positions.

  • Protect all accounting documents by locking away check stock, signature equipment, invoices, and critical account information.

  • Monitor the movement of employees, vendors, and contractors in and out of your offices.

  • Update bank account signature cards and systems access whenever personnel or procedures change.

  • Review and revise accounting processes periodically to ensure that they meet your company’s needs. Exercise due care in drafting and preparing checks and other withdrawal instruments.

  • Conduct audits of various check-control duties. Reconcile and monitor account activity frequently. Have your bank statements delivered to you unopened and review them immediately. Failing to do so may result in your company bearing liability for loss. Utilize your bank’s online services to keep daily track of your account activity.

  • Contact your business insurance provider and review your business insurance policy to determine if it provides coverage for employee dishonesty.

  • Finally, report losses promptly to your bank, credit card issuer, etc. in order to eliminate or minimize your ultimate loss exposure.


Alliance Advisory Group (AAG) is a business management advisory firm offering expert operations and financial guidance. Services include strategic planning and execution, financial management, organizational planning and development, technology management, and project management. The myriad of performance-based solutions AAG provides address the real issues organizations face and help companies realize increased effectiveness, profitability and sustainability.

You pay us a great compliment when you refer your professional associates to us. If you know of an organization that would benefit from the services of Alliance Advisory Group, your referrals are always appreciated.