The outlook for credit availability for small businesses is looking even bleaker after stimulus provisions tied to loans from the Small Business Administration ran out of funding last week, according to a recent article on WSJ.com.
With that in mind, finding ways to improve cash flow may have just become more important. Faced with a tight credit situation, cash is king.
In his recent 2010 Economic Forecast for Wholesale Distribution Webcast, Adam Fein said that the distributors who have “the skill, the will and the till” will survive and thrive in the next year. Though he includes access to credit as part of the “till,” cash is also key.
A big part of improving cash flow can be tied to improving customer payment cycles. While everyone is probably looking for the magic bullet for getting customers to pay on time or early, Sarah Lawer, a Seattle-area lawyer who maintains the blog The Company Line (thecompanyline.wordpress.com) offers a few straightforward tips on how to improve customer payment:
- Quicker turnaround in providing an invoice on products: “Getting paid starts with the invoice.”
- “Keep your invoices clean” – most invoices don’t require extra information; keep them clean and straightforward
- “Beat the payment deadline of your customers” – customers may not be operating on the same payment cycle that you do. Knowing their payment cycles can help you get the bill to them before the cycle closes rather than the day after, improving your chances of being included in the current round.
- Follow-up – don’t be afraid to contact your customers if they’re late on paying the invoice; they may be holding off until they feel they’re at the “have-to-pay-now” point.