I’ve written articles and given presentations on cash flow management. I thought this one was interesting because it’s written by a small business owner who actually implemented the specific cash management techniques he writes about in this article. It’s always nice to hear it “straight from the horse’s mouth”. Check out the article below.
Six Ways to Smooth Out Uneven Cash Flow
How one small-business owner made strategic changes when finances became unpredictable. By Scott Gerber
Four years ago I began to notice that my business’s cash flow would, like clockwork, experience two rough periods during the year. The first was between December and February and the second from July to the beginning of September. Specializing in producing short promotional videos known as “sizzle reels,” we had plenty of client work in-house during those periods but were lacking the funds to fuel our overhead. The problem was that many of our clients were taking up to 60 days to complete payment on their invoices.
I began working with my team to come up with creative ways to help avoid these financial ruts. Here are the six steps we took to correct our cash-flow woes without losing personnel or productivity:
1. Adjust customer-credit and payment terms. Initially, we requested that clients pay a 25 percent down payment for projects. But projects for smaller clients often took longer and so final payments for these were longer in coming. To remedy this, we increased the initial down payment for first- and second-time clients to 50 percent. We also increased the down payment percentage on our longer-term clients by a few points.