Accelerate Your Cash Flow to Buy More Time

By Elaine Pofeldt on 27 February 2011 (Updated 24 March 2011) 0 comments
Photo: willivwilliv

Small businesses come in all shapes and sizes, but most agree on one thing: uncertainty about the future is bad for business. In its recently released 2010 Year-End Economic Report (pdf), the National Small Business Association found that 68% of small business owners view uncertainty as the biggest challenge to the survival and growth of their businesses in 2011.

There’s no way to insulate your company completely from the unpredictability wrought by the changes taking place everywhere from healthcare to regulation. You can, however, position your company to better weather these conditions by paying more attention to cash flow. You’ve probably already taken steps to slow down spending, which obviously will help on this front. The more money you can collect in a timely way from your clients, the greater your ability to handle unexpected detours and take advantage of new opportunities.

Nick Balletta, CEO of TalkPoint, a New York City firm that brings in about $25 million in sales by providing technology for webcasts and virtual meetings, pays constant attention to maintaining healthy cash flow. Here are some of his tips on speeding up payments from your customers, so you can improve your company's position for whatever lies ahead, good or bad.

Vet Potential Clients

You don’t necessarily have to do a credit check on every new client, but it’s a good idea to do a little digging to make sure the client is likely to pay you on time. Some trade groups and industry associations allow members to share information anonymously on the payment histories of companies that work with their members. If you don’t have adequate cash reserves, it may not be the best time to go after a prestigious client that has a history of paying small contractors and suppliers in 90 days or more.

Push Back

In negotiations with clients, Balletta doesn’t give up 30-day payment terms easily, because he knows how vital they are for his company’s health. “Companies will always ask for 60 days,” he says. “We push back.”

Make it Easy to Pay You 

In the early days of running his company, when money was tight, Balletta found he could speed cash flow by accepting the most common corporate credit cards. Although there were some expenses associated with getting set up, the benefits of getting paid for jobs immediately outweighed them, he says. “We found that if it cost less than $10,000, people were putting it on the charge cards,” he says. He has since built on that approach, by adapting his company’s software to work smoothly with the purchase order systems of big clients. “If we mirror their systems, we get paid quicker,” he says.

Bill by Department 

If, say, a company’s multimedia department has hired TalkPoint for a project, his team finds out what code the company uses to charge expenses to that department and includes it on the invoice. That reduces the need for the client’s accounts payable department to hunt it down and therefore saves time. “It’s so much easier for them to forward those on,” Balletta says.

Follow up 

This may sound obvious but given how full your clients’ email boxes and invoices are likely to be, it’s a good idea to ask for confirmation that every invoice has been delivered – and to inquire immediately if a payment becomes late.  Balletta encourages his receivables team to cultivate friendly working relationships with those in the accounts payable department of his clients – which helps to keep his invoices at the top of the pile. “People do business with people,” he says. 

 

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