Bay View Funding Blog

Poor cash flow management; it is the Achilles heel for many small businesses. It is always hard when your customers pay late, but if you effectively manage your cash flow, late payment shouldn’t mean disaster. It pays to be prepared!

Let’s face it; there is a lot to think about when starting a new business. It is common business practice to take on long, and short-term debt to help finance operating expenses, especially as you start out and as you begin to grow. This debt needs to be managed and utilized in a way that will encourage success, not bog you down in the debt mire. It certainly feels great when you realize your company has grown enough that you can balance your accounts payable with your accounts receivable. But then it is time to grow again and this is when cash flow management becomes even more critical.

Worried about timely payment of your accounts receivable? Never underestimate the importance of a reminder letter. Try the ‘I want to help’ approach before considering a collection agency. One of the biggest headaches for any small business is the payment collection challenge.

If you have planned and worked out which customers are good credit risks, and have offered them payment terms, you may then be concerned about further late payment. So you want to employ the most effective tactics to encourage on-time payment. Are you prepared to ask your customers to pay their bills, or do you leave it until payment is late and decide on an approach then? Payment reminder letters are always helpful as a tactic prior to any form of late payment.

Every time you offer your customer terms on their invoices, you are extending credit. Do you have an application procedure in place in order for your customers to qualify for extended payment? Or do you offer 30-day payment terms or longer as a matter of course?

If the answer to the last question is yes, you may want to rethink your policy. No matter what, your customers should be applying for the privilege of paying anything from 30 to up to 90 days past the due date of their invoice. A well-constructed credit application tells your customers you are serious, and may also make them feel more comfortable about doing business with you.

Establishing that your customer is creditworthy means collecting all the information needed should the account become delinquent. It is always prudent to be prepared for late or non-payment from any of your customers. There are certain references that help establish the security of each account, such as bank references and trade references. Using these references enables you to establish past history with creditors, and also how well financial commitments are handled. In some instances, it may also be worth asking if good customers with less than healthy references are prepared to sign a personal guarantee. Should their business go into default, they will be held personally responsible for any outstanding payments.

The demand for temporary staffing is on the rise, but how do you go about getting the qualified candidate for a temporary position?

We have discussed the challenges temporary staffing agencies face, and expounded upon the best ways to keep the cash flow flowing, so your business remains in the black, but no matter how you cut it, having qualified temporary staff to call upon is a vital component to the success of your company.

In her excellent blog, Subadhra Sriram, Editorial Director of Staffing Industry Analysts, states that it is the war for talent that is fueling the necessity to market to the temporary worker. She writes, “staffing firms more than ever need a strong case to present to the worker.” The blog discusses how important it is that you represent not only your brand, but also the brand you are working for (your clients) to those people you are trying to recruit to fill the temporary positions. If your temp is happy, the general consensus is that the client will also be happy and return to you to fill more temporary positions.

Does your company struggle to collect on payments from customers? Have you noticed a continuing slow payment trend? This could be because you have extended credit to the wrong customers.

Offering credit, or terms is certainly valuable. It can help your customers manage their cash flow, which could be the incentive they need to choose you for goods or services. Many of your competitors are more than likely extending credit to their customers, and it is important to keep up with your competition. But you do need to understand the limitations for your company before you decide.

• Do you have a grip on your profit margins?
• How much credit you can afford to offer to your customers?
• Do you frequently track all outstanding transactions and their value?
• Do you effectively project your cash flow?

Managing cash flow can be extremely challenging for a small to medium business, and we have discussed many times in previous blogs some of the best ways to manage cash flow. Collecting on delinquent invoices from customers to whom you have extended credit is not fun, so let’s review a few tips to make it easier.

Cash flow issues often initiate a necessity to pay bills late, including federal and state taxes. Consider some sage business advice concerning on-time payment.