Managing cash flow is a challenge for every firm. Respondents to our Best Practices Poll—all of whom have struggled with this problem—offer a range of tactics for watching your receivables and keeping your head above water. Responses included:
- “Stay on top of receivables,” says Wtbtx. “I will come in on Saturdays to do statements and fax them off. Then, on Mondays, I do the dreaded call to the accounts-payable department of the customers outstanding. For the most part, it works. If I get someone who tries to dodge me, I make myself call on a regular basis until they have a cheque ready, and I tell them I will pick it up.”
- “When cash flow is positive, put aside up to three months’ operating expense,” says Marie. “As well, you should invoice promptly and follow up on late payments, and hold payables until due.”
- “Follow these three steps,” says Wwidla of Fulton Engineered Specialties. “1. Make deals with customers for prompt payment before shipping the order. 2. Lose sleep. 3. Pray.”
- “I shuffle monies rather than borrow,” says Statoff. “Borrowing is my last resort, and I never gamble beyond what I can afford to lose.”
- “Cash flow can be improved if accounts-receivable systems are put in place and procedures followed without deviation,” says Apeck. “If the terms are 30 days and the invoice is not paid, charge a predetermined interest rate. And give a small discount to those customers who are willing to pay as soon as the service is completed. It costs more money to chase customers for payment than it does to give that small discount for early payment.”
For his/her answer, Apeck will receive a copy of Estate Planning in Six Simple Steps by Edward Olkovich.
Watch for another Best Practices Poll in the next PROFIT-Xtra.