Facing a cash flow power struggle? A new approach could be in order

For small and medium-sized businesses, cash flow is critical.

The smallest of gaps can wreak havoc, sending even the most diligently run business into a tailspin.

And it's often something larger organizations don't have to deal with. If they enjoy a steady flow of cash into their business, then they can at times be a little laid back when the time comes to pay their invoices.

That's why, when working with larger businesses or nonprofits, it's important that small businesses recognize this power imbalance from the outset, and plan accordingly.

Playing with the big guys

Landing a big client is, more often than not, great for a small business. They're often lucrative, value your skills or products, and there's an element of prestige attached when working with a renowned brand or organization.

But it's also something of a double-edged-sword.

Big organizations can be inflexible and difficult to deal with. They're used to paying invoices in 60 or 90 days, and will often delay payment to better their own cash flow situation.

What’s the answer?

Unfortunately, it's not as simple as sending more reminders once your invoice becomes due. Those reminders can and do fall on deaf ears, and as the power remains with the client, it's tough to know what to do next.

It's therefore important that you're proactive with your financial planning.

Prior to taking on large contracts, you should assess the opportunities and threats in doing so. By forecasting, you can pinpoint gaps in your cash flow and make the right moves to plug them.

This might involve taking on a line of credit to hold you over until you are paid, or tweaking your payment terms and charging a deposit upfront.

It's also a good idea to diversify the type and size of client you work with - it's often risky to put all your eggs in one basket.

And if they are unwilling or unable to work with you to determine a mutually beneficial payment structure, you may need to consider dropping them as a customer.

Let us help

There are a number of options open to you as the vendor when dealing with a larger organization. You shouldn't be intimidated; if you have a product or a service they value, it's in their best interest to work with you on terms that benefit both parties.

We can help you make the right call by providing you with insight into your cash flow. By analyzing what's come before, we can forecast what lies in store for your business, identifying trends and pinpointing risks.

Don't let a big client push you around and dictate when and how you should be paid. If you're facing a cash flow power struggle and would like some financial advice, talk to us today.


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