If you’re a business owner, I’m sure you realize the importance of cash. Nothing will sink a company faster than cash-flow problems. And unless you really, really just love what you do, you went into business to generate cash. Heck, even the most commonly used methods of valuing companies are based on measuring the amount of cash they can generate. Bottom line, cash is the life blood of a business. Not a very radical sentiment I know, but follow me.
If we all agree that cash is the most (or at least one of the most) important assets a company can own, then why are you afraid to ask for it? That’s right, I’m addressing 90 percent of the business owners I have met since I started my practice. Why are you (or your employees) afraid to ask for your money?
Whenever I start working with a new client, particularly one that is having cash-flow issues, the very first area I examine is accounts receivable. Often, the answer to all of their cash-flow problems (or at least a big chunk of it) is right there in the accounts receivable. But when I ask why these amounts haven’t been collected, there’s always a reason: “He’s a long-time customer,” or “This is a very large client so we had to give them terms,” or my favorite, “They just pay when they want.” How can you run a business when you allow your customers to dictate your cash flow?
The answer is twofold:
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