Are You a Bank in Disguise?

Managing Cash is the life blood of any business or non-profit and how you manage cash - and receivables - is crucial for your growth. So, here's a questions - what's bigger, the amount that customers/members owe you, or what you owe suppliers/vendors? When you agree to offer credit to your customers, you in effect, allowing them to borrow. Similarly, you are borrowing yourself when you 'pay later'.

Here are are things you should do to ensure a well oiled financing machine:

• Age your receivables weekly/monthly and set up a process to deal with late payers.

• What is your margin on goods/service sold? How many months late can you go before you lose money? Be prepared to cut off customers and stand firm.

• Consider increasing prices for slow payors to offset interest costs. Setting terms such as 2/10, net 30 induce customers to pay quickly...and make sure you build that 2 % discount into your pricing strategy

• Induce autopay options for all subscription services - when you get your money in the beginning of the service period, you actually pay your employees with client funds! What a concept...

• Take out a working capital line now when the going is good, just in case. Again, your average interest expense should be used for price planning.

Let’s meet and ensure you are not a Bank!

Jeffrey T. Stern, CEO Whisperer™