This winter was brutal in every sense of the word, and most people are looking forward to spring. The American Cleaning Institute reports that more than 80 percent of Americans plan to spring clean their homes, a ritual that dates back to the 1700s, when the first days of spring allowed you to open your windows and doors and let out the winter dust and dirt.

For small-business owners, the process of spring cleaning is one that should be applied to your finances as well. After a long winter of (hopefully) generating sales, managing operations and dealing with daily fires, it's important to take some time to assess where you are, determine what needs to be cleaned up and then take action.

This five-step plan covers the critical areas of a good financial spring cleaning:

Step 1: Prepare an accounts receivable aging table. An accounts receivable aging table organizes all the money owed to you by customers according to the amount of time the money has been owed. The time outstanding is typically organized into 30 day groups: 1 to 30 days, 31 to 60 days, 61 to 90 days, 91 to 120 days and more than 120 days. You can adjust the table to the specifics of your industry. Government contractors, for example, might need to take the table out to 180 days, while some distributors might prefer to express it in weeks.

The goal here is to determine what percentage of your customers are taking too long to pay. Once you know, you should use this information to pursue unpaid debts. It’s also valuable to help you determine if you need to change your payment policies or even eliminate certain types of customers that habitually pay late.

Step 2: Compare pricing to competitors. Pricing is one of the most difficult areas of a business to get right. Over time, many small-business owners have a tendency to negotiate one-off discounts and deals that can lead to an incoherent pricing strategy. Market conditions may also change, making your pricing too high or, even worse, too low. The best way to make an assessment is to compare your service offerings and prices to those of your competitors.

Step 3: Review paid subscriptions and recurring charges. It happens to all of us. We sign up for a particular online software tool, resource or subscription service because we need it for a specific project. The project ends, but we forget to cancel the subscription or keep it “just in case we need it.”

Since most subscriptions automatically renew and are billed discreetly to our credit cards, it’s easy not to notice that we're paying for a service we no longer need. Take a careful look at your credit card and charge card statements for the past 12 months, and identify all recurring charges. You'll most likely find a few you can cancel and enjoy the savings.

Step 4: Review long-term contracts for renegotiation opportunities. Equipment leases, professional service contracts and other long-term contracts also represent an opportunity to negotiate savings. Just because you have a contract in place doesn’t mean you can’t try to get a better deal. Renewing early, requesting adjustments for deficiencies or requesting a lower interest rate are just some of the requests you can make that will save you money. The worst that can happen is you're told no.

Step 5: Review cash balances. When summer arrives, many businesses “check out” for a few months and postpone major purchases until September, which could leave you wanting for business. For many consultants and contractors, for instance, summers tend to be slow times. But even though revenues might not be coming in, bills must still be paid. That’s why it’s important to review your cash balances to ascertain your ability to cover your costs until the fall when business picks up again. If you don’t have sufficient cash, now's the time to obtain a working capital loan or line of credit.

If you keep reasonably organized records, this spring cleaning plan shouldn’t take you more than three afternoons. If, however, you haven’t been doing a good job keeping your paperwork organized, you'll need to take the time to first organize your records.

In either case, these "housecleaning" tasks are a worthwhile investment—every dollar you squeeze out of a financial spring cleaning can be put right into your pocket or reinvested for business growth. For example, a company with operating expenses of $80,000 per month that can squeeze a 3 percent savings from this process will earn an extra $28,800 a year. If it costs your business $3,000 in marketing to acquire a new customer, then this savings can help you gain close to 10 new clients. 

Now that’s a whole lot better than finding spare change in your sofa while spring cleaning your house. Why not get started today?

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