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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

I caution you to use this next tactic judiciously. I know you’ve heard about granting discounts of 2% or 3% to clients who pay within seven days. Think about increasing the size of the carrot to 5% for a check on the last shoot day. Tell them it’s a one-time favor to accommodate the economic climate. When you indicate the discount on your invoice, write it out as “quick pay discount for this job only.” You’re straddling a fine line between getting cash quickly and setting a precedent that your client might want to capitalize on. Be smart. Don’t extend the courtesy to big companies that will pay eventually unless your cash flow is dire.

If you get news that a client who owes you money is on the fast track to bankruptcy, try to move quickly to get partial payments to cover at least your out-of-pocket expenses. If you’re going to lose, make an effort to only lose your fees, but try to avoid going into debt by getting stuck with all of your costs because your client tanked.

We’ve reached the cliché part of the article where I tell you it’s time to cut back on your overall outflows. I won’t bore you with insanely obvious advice. I’ll just share a method that I’ve found effective for intelligent expense cutting.

Think about the core of your business workflow. Having a high-speed Internet connection is a key component to making money. Don’t decrease your broadband tier so you can still afford HBO. Lose the HBO. Don’t cut your cell phone services to save $12 a month.

Communication is essential to getting more work. I know new computers are expensive, but if you’re working on a three-year-old computer and you pray daily that it doesn’t collapse on you, an unexpected crash is always more expensive than biting the bullet and getting a new unit. Keep this in mind: Crisis is cash. You’re smart enough to know where the weak links are in your technology and equipment. Deal with them before they become problems.

Place the essentials for making money at the core of a circle, then add concentric circles going outward for a clear view of what has diminishing necessity. Adopting habits like thinking ahead and purchasing airline tickets early for a trip you know is coming also will help your case.

Lastly, keep in mind that everyone is in the same economic mess. People would rather have some business than none. This is the time to find out if the people you’re buying from can negotiate on price. You’ll be surprised.

Cash Is King
In prosperous economies, you have the latitude to leverage your credit to run your business. In more challenging economies like the current situation, less leverage and maintaining more cash flow is the mind-set to get in. I know it’s not easy, and cash is tight, but if you have some of these concepts in mind and you’re proactive about your financial situation, you’ll be less of a victim. Any movement forward, no matter how incremental, always will feel more empowering than yelling at the TV and the Wall Street “wizards” who helped get us into this mess.