Focus, Focus, Focus

Thank you to the many responses so far and the visits to the advertisers that move me up in the blogging lists! (I have no idea what that means, but it sounds pretty techie...)

Let's get back to business, though.

Many responses via email and comments (always welcome) suggesting that we might just be onto something here with regard to cashflow and watching our receivables - particularly if we are a small business with a few large customers.

How do we handle our receivables, though? After all, as business people, we are probably type "A" and need control. Additionally, we like to count all of the money before, during, and after business hours, right?

The answer is one word - focus.

FOCUS can be broken down as follows:

F - Be FISCALLY responsible to yourself, and your business, first. If you have a client that you wouldn't lend a pencil to, you probably don't want to extend credit to them - even if it means losing the sale. Better to have not lost production costs, shipping costs, paying your salesperson and your staff and then not get paid than to never make the sale at all.

O - Be OPPORTUNISTIC when you do extend credit to your client. Create a competitive advantage if you open a receivable line to a new client by suggesting minimum orders or requiring a larger down-payment amount. This allows you to relax standards for the client once they've established a timely history with your company.

C - Be COST CONSCIENTIOUS. If you have a vendor that requires payment in 30 days or less, be aware of that fact as well as when your receivables are due. It makes absolutely NO SENSE to make your billing date due the first of the month if your suppliers require payment within 30 days from time of receiving their shipment. If you received supplies on the 15th of May, for instance, payment would be due June 15th. Likewise, if you make a credit sale on June 1st, your client has until July 1st to pay you in full. That's a 15 day difference between funds coming in and funds going out.

U - Avoid being UTOPIAN in your approach to lending. While we like to think that everyone pays their bills ahead of time like we do, that's not the case, folks. In fact, many larger companies take advantage of smaller companies and deliberately push payments back 45, 60 or 75 days! Not everyone in business is a nice guy. Don't fall into the trap of assuming we all want a "touchy feely" approach to collecting bills.

S - Finally, be STERN when dealing with deadbeat accounts. This is YOUR business, not theirs. They can lay anything out there as a possible reason for the delay in payment, but stick to your guns and demand payment. Accept cashier checks or money orders if a client has a "spotty" record of repayment history, and develop strong relationships with that AP Clerk at your clients' offices. Sales are an important element in any business, but collecting money is probably more important. Without money coming in, there is no sense selling anything. In fact, if you keep selling and NOT get paid, yours is a losing business my friend!

To be sure, there are plenty of good clients that will pay on time. Obviously, it's a win-win situation that grows out of respect and integrity toward each others' business. However, what do you do when someone DOES NOT pay you on time? How do you handle it?

The answers are as many as the days of summer are long. We will explore them next week, but I urge you to begin thinking about how you handle your existing relationships with clients, and vendors. I'm certain there are things that can become uncomfortable from time to time and as a result, your operating system could likely be modified to accomodate these changes.

In the mean time, I urge you to comment, write and phone me with any of your questions, and I hope you're enjoying this weekly update as much as I enjoy posting it!

Here's to a profitable week ahead.