Recession Rule No. 1: Cash is King.
by John P. Kane
J.P. Kane & Co.
Take a look at your overall cash flow.
1. Are you collecting your receivables (amounts your customers owe you) in a timely manner? If not, review and follow up with those customers.
2. Are you taking advantage of prompt payment discounts offered by vendors?
3. How quickly are you paying vendors? If they offer you 30 days to pay are you paying the outstanding amount immediately or are you taking advantage of the time they allow you to pay. We are not saying to become delinquent, but to take advantage of the time allowed.
It is important to budget and recognizing the company’s cycle (periods during the year when business is slow or business is high) so that they can plan ahead for the slow times. The use of a line of credit should be included in their plan to help them through the slow times, but they also need to include the payback on the LOC in their plan.
Look at your loans and be sure the financing is in line:. Loans for equipment and longer-lived assets should be term loans. Loans that are for cash flow needs should be on a line of credit.
Customer service is a lost art – and it does not cost anything for your employees/team to give awesome customer service. It will help customers and clients come back. For example, for those prompt paying clients, tell them thank you. It will increase the perceived value the client/customer receives from you.