Raising Money
Internal Cash Flow Management: Managing the Receivables Process
By Julie Gerstein
Feb 7, 2006, 23:55

Small businesses serve as both providers of goods and services to clients, and also act in the role of client to their vendors. If your business needs to increase cash flow, and you’ve already considered the terms and conditions of your receivables, then it may be worth examining your vendor payment cycle and your business’ relationship to its vendors.

As a cash-strapped business, you should examine the rate at which you’re paying your bills. Are you taking advantage of credit extended to you? Are you paying outstanding invoices off right away or are you juggling your cash flow needs with your vendors’ billing cycle?

If a vendor allows you 30 days to pay an invoice, and you’re paying on receipt, improve your cash flow by paying the invoice when it's due. In general, it's best to hold onto your cash as long as possible without damaging your vendor relationships or credit rating.

But what if you’ve waited until the end of the billing period and the money just isn’t there, or is tied up in other projects? If you know you are going to be able to pay just a few days after the due date, just send in the payment late. If you know your payment is going to be more than a little late, it's best practice to call the vendor and let them know the payment will be late. In most cases, the vendor will appreciate the courtesy. Additionally, let them know when they can expect to receive payment - and make sure you get the payment in on time.

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