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1. Don't press your customers for payment of overdue balances. Small business owners can be hesitant to pursue collection of past-due accounts receivables for fear they'll alienate customers or make them angry. However, avoiding active collection efforts so you don't anger customers is taking responsibility for their problems at the expense of your company.
This comes down to a balancing act between your good customers who may be experiencing temporary cash flow challenges and your traditionally slow-paying customers whom you tolerate in good times but can't afford in bad times. Use this opportunity to collect as much as you can from the deadbeats and then drop them so you can focus your energy on serving your good customers better.
2. Neglect getting regular reports on cash flow. Common complaints are that "it's too much work getting these from accounting" and "they're too hard to read anyway." However, neglecting to regularly receive and scrutinize accounts receivables and accounts payable aging reports, bank account reconciliations and short-term cash forecasts is asking for trouble.
These reports will tell you where your cash is, where it's going, and where you need to put effort into making changes -- speeding up collections and/or slowing down payments, for example. This is essential information in good times, but in bad times it's absolutely critical.
3. Give your customers cut-rate prices when they ask for them -- and they will! Your customers want to reduce their costs, of course, but often without doing anything differently themselves. They'd rather you just cut your prices. But if you agree, you will be funding their inability to manage their business properly, to the detriment of your business.
Instead, give your customers tools and techniques to enable them to better pass on their costs to their customers by selling value rather than price.
Source: Gene Siciliano, CMC, CPA, is an author, speaker and financial consultant who works with CEOs and managers to achieve greater financial success in a dramatically changing economy. As "Your CFO For Rent" and president of Western Management Associates, Gene has spent more than 23 years helping his clients build financial strength and shareholder value through applied knowledge and process improvement. His books, Finance for Non-Financial Managers and Financial Mastery for the Career Teacher are both available in bookstores and online.
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