47063
46201
Common-Sense-Business-Solutions

Your business is not a bank

Your plumbing business is not a bank. But when you are giving terms to customers that exceed what you get from your suppliers, you become one. And every time that someone does not pay you, you are a bank. But unlike a bank, your company does not have the resources to continue paying employees and suppliers when payments slow down.

On every client list there are a handful who do not pay until you call them, who tell you the cheque is in the mail, or who simply cannot pay. Having receivables arrive at the right time is the best way to ensure you can pay staff, contractors and suppliers on time—which is key to keeping your business running smoothly.

How?

 

Manage your cash flow

Entrepreneurs understand that a $10,000 sale results in a nice profit. But most forget that the suppliers will be knocking at the door looking for payment long before the $10,000 comes to your bank account. Knowing the payment cycle of your customer and your supplier is important. Knowing what your cash flow will be on a day to day and week to week basis is more important than any profit and loss statements produced three weeks after month end.

 

Invoice on time

I do not have enough fingers and toes to count the number of times that companies in financial trouble were weeks behind in sending their invoices. This stack of paper is cash almost on hand.

Invoicing on time might mean as soon as a project is finished, or, in some cases, it might mean requesting a deposit from a client at the beginning of work to get cash flow going early on.

 

Make it easy to pay

Accepting multiple methods of payment is one way to accelerate receivables. Do you accept electronic payments? Or, farm animals in exchange, only? Cheques only? Credit cards? Bank drafts only?

 

Be disciplined

Better cash monitoring, collections and invoicing are all part of the same administrative function that must be done on a regular and frequent basis. Getting behind is death by debt.

 

I have taught many business owners the strategic importance of cash management. If you need a template to manage your cash, email me at [email protected] or [email protected]



More Common Sense Business Solutions articles

44653
About the Author

Andrew Gregson, BA, MA, M.Sc. (Econ), holds a Master's Degree in Economics from the London School of Economics.

Andrew's experience working with an international business consultancy and being a business owner for 15 years was the impetus for his book "Pricing Strategies for Small Businesses". He brings his expertise in finance, pricing and debt restructuring to the table to help struggling manufacturing and service companies to return to profitability. This has helped companies to rebuild value and often to sell at much higher dollar values.

Andrew has contributed to trade journals, "Spark" on CBC National Radio and has been a guest speaker at business networking groups, colleges, universities on his topics of expertise - pricing, exit plans and debt. He is also a frequent contributor to blogs and online postings for business help.

Andrew is currently the President, Board Of Directors intent Financial Inc., his role is overseeing intent Financial Inc., Intent Investment Corporation and other related ventures.

 

Website link:  www.intentfinancials.com

Contact e-mail address:   [email protected]



The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

Previous Stories



47832


48385