Cash Flow Secrets of Entrepreneurs — Here’s the REAL Secret
AccountingWeb offers a helpful article about cash flow entitled, “Eight cash flow secrets of entrepreneurs.” The author’s second point is the one that caught my eye, about the value of a customer:
As the owner of your business, you have the choice to run it as you see fit. But no matter how successful and powerful you become, remember that your customers are the reason you exist. So be good to them. Some of my oldest customers are still my best customers. One company can spend millions on your services during the years. If you’re a consumer company, even one person can be worth thousands of dollars over the span of your business relationship. For this reason, you must not let success change your mission to give every client and customer the royal treatment. They are, after all, responsible for the incoming cash you will use to pay your business’s rent, taxes, and other fees. They are the face of your cash flow.
The challenge for most us comes with very large corporate customers. Big corporations can be your most valued customers. We do, in fact, give them the royal treatment. Not only are they valuable for the money they bring you, but they serve as important marketing references. To be able to point to them as a customer often can help you attract other customers.
However much you value them — and, actually, no matter how much they value you — they will treat your invoices on their own schedule. Most of the people you deal with in a large corporation have never had to worry about meeting a payroll every month or paying the light bill. I don’t mean that in a disparaging way. It’s just fact. They don’t think about the state of your accounts receivables. The thought that your business may survive or fail on how quickly they pay does not enter into their day.
Most of the contacts you deal with do not make a conscious choice to delay payment. They just have a certain bureaucratic process to follow. Your invoices will get paid — just in their time frame. It’s inexorable.
This is especially true at this time of year, in the fourth quarter. Some corporations routinely hold off paying their vendors in an effort to show attractive fourth-quarter results. When I was in the corporate world, our finance department did that routinely.
In my next post we’ll take a deeper look into the fourth-quarter gamesmanship among large corporations.
