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The Cash-flow CrunchBig firms are dragging their feet on payables, taking as long as 60 days to settle up, and creating new problems for entrepreneurs.
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Working Your Assets
Venture merchant financing can save cash-strapped companies.
Published December 2005
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COMMENT ON THIS ARTICLE1.Increase your reserves. Boost your line of credit before you're desperate for the cash. Keep at least three months' worth of cash on hand so you won't be caught short.
2.Make some rules. Do you need payment in 30 days? Or can you manage 45? What happens to clients who don't pay on time? Will they be subject to late fees? The more you've thought about billing terms, and possible billing problems, the better you'll be able to deal with issues when they arise.
3.Babysit payments. If you don't ask, you won't get--and you certainly won't get quickly. Get to know your clients' accounts payable people, and as soon as your payment is one day past due, make sure they know it.
4.Stand by your terms. If clients try to change terms unilaterally, call them on it. If you agree to slower payments, determine how much it will cost you--and raise your own rates to cover the cost.
5.Offer discounts for early payment. Sometimes it pays to provide incentives for customers to pay ahead of schedule. Discounts can sting, but there's nothing more valuable than cash in hand.
