4 Essential Tips for Avoiding Cash Flow Issues

4 Essential Tips for Avoiding Cash Flow IssuesRegardless of whether you’re a startup or established small or mid-sized business, cash flow is on the forefront of every CEO and CFO’s minds. The truth of the matter is that for many businesses, a delay in the payment of a major invoice can mean the difference between making payroll or not.

While I may not have the secret recipe for never stressing about your company finances, there are actionable tips and techniques for helping to avoid cash flow issues.

Develop a Relationship With Your Bank

The time for researching and establishing the ideal line of credit is before you actually need it. If you are branching into new markets, launching new products, or going after the bigger fishes in your industry, understand the potential impact on your finances. Talk with your bank about your options, and make a back-up plan.

Shorten The Length Of Your Payment Terms

With the smaller invoices you have been sending in the past, it may have been fine to have 90 to 180-day payment terms, but if you’re suddenly looking at single invoices that could make or break your finances, you may need to reevaluate your plan. Try putting more favorable terms into your contract, and see how they respond. The worst that can happen is having the client say “no.”

Discuss The Terms Before The PO Is Issued

Talk with the individual who is putting in the order about the terms, and see if he or she can help before the purchasing order (PO) is issued. Once the order is in the hands of the purchasing department, you get lumped in with the multitude of various sized vendors in their system. While your $20,000 invoice is a big deal for you, the purchasing department may be focusing on the $1M clients. Also, it’s generally a good business practice to ask for changes prior to any contractual paperwork, as it’s much harder to change something that’s already been agreed upon.

Understand Their System And Timelines

While your PO may call for 30-day terms, the clock often starts when the invoice gets processed into the client’s accounts payable system. There are many variables that can impact the actual timeline. For example, the department may only process invoices into the system twice a month, meaning if your invoice arrives the day after processing is complete, you can add an extra 14 days onto your waiting period. Additionally, the individual who placed the order often must approve your invoice, so if you submit it directly to the accounts payable department, you can expect it to get bounced around a bit before getting processed. At the time of the order, ask questions about how their accounts payable process works, so you can plan accordingly.

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About the Author

Greg Emslie HeadshotWith more than three decades of experience in all facets of sales management, customer service, business growth, and staff coordination, Certified Business Coach Greg Emslie is a focused professional with the tools to help you grow and manage your business effectively. 

Driven by his ability to implement proven business concepts and help improve teams, Greg affects all areas of the companies he works with, including sales, leadership, profitability, and decision-making. He focuses on improving efficiency and processes for his clients while helping them grow their revenue base. 

Ready to begin finding other ways to make your company more productive? Let’s get the conversation started. Contact Greg Emslie for a business strategy discussion today!