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Tuesday, January 6, 2009

Staying In The Black

How to keep the cash flowing when the economic sky is falling

This Article Features Photo Zoom

Be Prepared
One of the primary effects the current economic chaos will have on you is the availability of credit. The banks (when I say banks, I’m including credit card issuers as well) are withdrawing their credit lines at an alarming rate. It doesn’t matter how good your credit rating is, or how diligently you pay your bills. The banks are cash-strapped. If you access your credit line, the bank has to come up with the cash to honor that contract to you. And since people tend to access their credit lines the most when times are tough, the banks could potentially find themselves in an uncomfortable position. To counter the threat, the banks are reducing or eliminating tens of millions of dollars of credit availability to their customers. This creates an anxious situation for small businesses whose business models absolutely depend on credit to operate. Clients are taking their time paying their bills. With reduced credit availability, people who owe you money will find their cash flow leveraged. Payables will get prioritized. Unfortunately, photographers’ invoices are low priority, mostly because we don’t have an immediate system of retaliation to cajole companies to pay us. Yes, we can pursue legal action, but by the time we decide to cross that line after agonizing over the ramifications of pursuing legal action, months have gone by. By the time any legal action we take poses a serious threat to the client, more months have disappeared.

I’m not advocating sitting on your hands while someone tries to screw you over. I’m just telling you what’s happening on the other side of your check so you can prepare. Nobody you shoot for has a premeditated intention of not paying you. It’s a matter of cash flow and decreased credit resources.

One of the things I can tell you from experience is that during troubling economic times, businesses fail. Have a look at your receivables list and try to make a determination as to which of your clients are the weakest financially. Young magazines, especially independent ones, are the most vulnerable. Start-up companies that have particularly ostentatious spending habits also should be looked at closely. Larger companies are less likely to default their invoices and will require more patience than anxious worrying.

No one is ever going to know that you’re scrutinizing the financial health of your clients unless, of course, you’re daft enough to announce it in some sort of egotistical outburst. So not taking the time to do an Internet search for current articles about the clients who owe you bucks is absurd. As I mentioned in the opening of this piece, understanding and action are two of the tools that are going to get you through this storm.


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