Amid the downturn many small business owners legitimately continue to lament the lack of available credit from their bank. Assuming that is not likely to change near-term it might be best to address liquidity issues through activities more under the owner’s control.

Many business owners need to be more attuned to potential internal processes improvements that, though minor, collectively can have improve overall cash flow.

1.      If the company produces a product, forward the invoice to the customer on the same day that the order is shipped.

2.     Do not “snail mail” the invoice. Get authorization from your client to e-mail the invoice. Be sure to copy both accounts payable and the purchasing authority. This minimizes the often heard excuse that accounts payable has not received a copy of the invoice yet from the buyer.

3.    Develop and nurture key supplier relationships and if necessary, ask for a temporary extension on your normal payment terms. Be proactive and deliver on your commitment.

4.     Many small businesses have their payment terms dictated to them by larger companies often on less than favorable payment terms. The upside here is that usually these companies are not a credit risk. Also they are often open to electronic transactions such as EDI, wire transfers and ACH that can insure that payment is made on the exact due date. Consider requesting your larger customers to pay you in this manner.

5.     If you are a professional services firm who customarily bills clients on a monthly basis, put the systems in place to ensure that all biilable time and expenses are gathered in a timely manner so that the customer can be billed as soon as possible after the month ends. Alternatively you may consider billing clients once a week or twice a week.  

Expect push back:

“We have always done it this way” (So what?)

                “Our systems are set up to Bill monthly” (Change them)

Managing cash flow is not just the bane of finance. It's important to educate everyone throughout the organization on how their individual activities can contribute to overall cash flow improvement.