"I've noticed some of my customers have become slow to pay. What are some ways I can best manage my cash flow?"

April 07 2009 - Syracuse Post Standard

Tracy:
I have always believed a direct approach regarding a problem is the best way to handle hard situations. When customers have been slow to pay, I simply call them and have a conversation about the payment issue and discuss how it can be remedied. I try to see the situation from their perspective and see if I can offer flexibility to the problem. Honest communication has helped me maintain loyal customers. Don’t forget to have a candid conversation about your situation with the bank as well.
Secondly, when I created Women TIES four years ago, I made sure to create multiple services which produced numerous revenue streams so my cash flow ran smoothly all year. Sometimes service businesses are so limited in what they offer, they can’t generate enough revenue consistently to maintain a steady cash flow. If you own a service business consider offering multiple revenue opportunities or stagger service contract payments with clients to manage cash flow better.

Theresa:
Establish a frequent billing schedule to help with cash flow and stay consistent. Remain diligent regarding tracking your AR. How many of your customers are in the 0-30, 30-60, 90+ category? Knowing where you stand is the first step. Secondly, clearly state your terms to each client. Once the customer is over the term date, make sure you are making contact immediately.
Every growing business needs a flexible line of credit. Establish a relationship with your point of contact at your financial institution. Keep them updated on your business so that they are aware of your progress. Send them copies of your P&L and AR on a regular basis. This way they are aware of your (financial) standing and can make those quick decisions when requesting an increase on your LOC or a business loan. Be mindful that cash flow management is imperative and your responsibility as the business owner.

Julie:
We solve this problem by requiring a 50% deposit on any large or custom order over a certain dollar amount. That way purchasing supplies for a big project doesn’t disrupt our cash flow, and if the balance does not get paid on time we’ve at least got our materials covered. I’ve never had a customer balk at this policy.
For most of us accounting is our least favorite part of running our business, but staying on top of the billing is absolutely essential. Let’s say your terms are Net 30, but you typically don’t contact the customer until the bill has gone past 60 days. In the customer’s mind, your terms are Net 60. Do you really want to wait that long to be paid? As soon as the invoice hits 30 days, make contact with them one way or another. As the old saying goes, the squeaky wheel is the one who gets the grease.