Cash the life blood of every organization. So what is the current state of your receivables? I personally always liked how Jean Sheppard put it “In God we trust, all others pay cash”. I know he probably did not create the saying, but I know it from his book. If only I could run my business on this philosophy
But back on target, as stated cash allows a business to cover payroll and pay their bills. It allows then to exploit opportunities for growth or buy competitors. Granted lines of credit and loans can assist, but the cash flow of the business allows for the loans and lines to exist. Banks are not there to help you grow your business; you are there to help them grow their business with as little risk as possible.
What are your processes and terms for your clients to pay your invoices? What percentage of your receivables are over 90 days? How much over 120 days? Are you tapping your lines to essentials loan money to your clients? What are your plans to actually collect that money? Do you have a plan, besides issuing late statements?
We send out invoices monthly, most pay or pay something on their accounts. I have two where I have to process payments on Square monthly. Some have requested some time, this is granted based on their past payment history. If they get too far behind, I contact them. Since I seldom have to do this, it tends to get their attention and the issue gets addressed.
What is your process? I have a client who works off of contracts and PO’s but they have a major manufacture over 120 days behind on three invoices. There have been fun back and forth e-mails on the subject. I suggested that they hold off on any further shipments, but the client is not comfortable with that option at the moment. So, the back and forth is their process, and not collecting the cash the end result.
What is your process for projecting cash flow? Is it a written process, do you and your employees know the process and following it for all clients? Has it been effective or at least somewhat are target? Or do you just prefer the mad scramble to cover that payroll? Or sticking your hand in your pocket to cover the rent.
Remember Cash is King!