Are you in a cash flow crunch? Part 1 of 2


A challenge every business owner experiences, no matter how long in business, is the stress of cash flow not flowing as expected or projected. Especially when there are receivables on the books, if the money isn’t in the bank, it can be stressful waiting for it to be received when payroll must be met, vendors be paid and investments need to be made.

See if any of these are part of your cash flow problem.

Delayed Billing or Receipt: If you don’t bill the customer, you don’t get paid. This, of course, is obvious, however, it amazes me how often a business will delay issuing a bill to a customer, which in turn delays receipt of payment. Additionally, the reliance on electronic-only delivery can cause a bill to be overlooked due to the plethora of other messages being received in one’s inbox. Billing should be a regularly scheduled process that you are never too busy to get done. Additionally, snail mail and email bills should be sent until a customer shares a preference of one over the other, which also confirms they are receiving these bills as expected.

No Receivables Process: Staying on top of your receivables requires a process. This includes a protocol for communication with customers to ensure payments are made as expected. The practice of “friendly reminders” is a good one. Send a courtesy email identified as such alerting the customer that their bill is due in “x” number of days. Send another notice the day the bill is officially due reinforcing the methods of payment you accept, and any penalties for late payment that will be waived if you are contacted with confirmation of payment being sent. These can be set up as an automated feature in many accounting programs.

Unclear or No Terms & Policies: Having clear terms and policies will help significantly in keeping cash flow flowing. Do you require a deposit for work contracted or project work before it can commence? Do you expect certain types of payments to be made at time of service? Do you offer any cash or Net 10 discounts to encourage faster payments?  Do you have stipulations for progress or retainer payments for extended work over several months or a year? Clearly outlining these terms and policies will enable you to bill in ways that will enhance your cash flow over time.

Collection Quandry:  Are you wearing all the hats, including the collections hat when a bill is due? If you are also the one servicing the customer, this can sometimes make it awkward to then ask, “Where’s the money?” As a result, some business owners will let payment slide, not realizing the bad precedent being set for future payments. The best solution is having someone else be the one collecting on your behalf. It’s worth adding to your bookkeeper’s tasks or an administrative assistant’s role.

Customer Payables Process: In the case of B2B, your terms may not jive with a customer’s payables process. Some companies issue payments on certain days of the month, such as the 1st or 15th, and it can take a week for the bill to even get entered into their system. A purchase order number may be required. I learned that one of my retainer customers pays Net 30 along with only one time per month. Therefore, in order for me to get the payment as I expected, I needed to issue the invoice 30 days in advance to sync with the customer’s payables cycle. Since making this adjustment, no more waiting and wondering.

If you have all of these issues covered, and your crunch is due to delinquent customers, then you may need to explore some other avenues of improving cash flow. In Part II of this series, I will share some of the lesser known ways businesses are able to manage cash flow, when a line of credit or bank loan isn’t an option.

Sherré DeMao is the author of nationally acclaimed books and is founder of SLD Unlimited Biz Growth Inc., a full-service operational strategy firm based in Denver, NC. Her column seeks to help business owners build and grow sustainable enterprises with economic value and preference in the marketplace.  DeMao can be reached at 704.483.2941 or [email protected].  


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