Get the cash flowing in your small business

Image by Deedster from Pixabay

By Michelle van Schouwen

Client service businesses, such as the marketing company that was my bread and butter for three decades, often run into cash flow problems. The catch is that long-term cash flow problems in fact point to overall profitability issues. In this post, we’ll examine tactics to address both short-term lags and long-term challenges.

Know that all but the best-oiled operations have the potential to improve cash flow. What’s more, changing customer expectations can make the process easier. If you haven’t reviewed your billing systems and practices, fee structure, and prices recently, now is the time.

Get a deposit and progress payments: Clients are getting used to this. Don’t wait until the end of a protracted project to get paid. Many companies request an up-front deposit (perhaps a third of estimated project cost) before work even begins. Monthly progress billings or additional billings at the end of each progress stage assure money is in your account when you need it.

Set up monthly retainers whenever possible: We strove to get half or more of our income from predictable monthly contracts. The higher the percentage of our cash came from such contracts, the better our cash flow. Make sure clients need to give you 60-90 days notice to cancel. Consider an automatic annual renewal that happens unless the client cancels in writing.

Also bill immediately: We sent bills out every Friday – or more often if a large invoice needed to go out midweek. We tried offering a two-percent discount for payment within ten days, but noted that clients tended to take it even when they paid later.

Consistently charge interest: Invoices going beyond 30 days? Bill for interest at 45 days and every month thereafter. Sometimes, a client will see the new, interest-added bill and quickly send out a check without the interest, as if the two had crossed in the mail or cyberspace. We accepted that; you can rebill the interest, if you wish.

And, speaking of mail: You can now bill electronically for faster results. Some clients will pay electronically…for faster results. Some will set up automated payments. Clients may want to pay by credit card, or Venmo, or Paypal. Be prepared to accommodate every billing and payment method that speeds money into your bank account.

Email and call clients regarding late payments: Don’t be timid. It’s your money. If a client is really struggling, set up a payment plan.

Charge for all the “little extras”: Major corporations know what they are doing when they tack on small fees in addition to your basic contracted charges. You may be able to do the same. Our company assessed additional fees for clipping services for public relations, for monitoring of certain advertising results, and more. Do not give work away.

Have a well-written contract so you can flag mission creep – and charge for it: If your work agreement is vague, it is difficult to call foul when a client requires more time and resources than you had planned to provide. Sharpen your pencil upfront, and let the client know that you’ll alert them to any potential upcharges before doing the extra work.

Raise your prices slowly and often, if you can: Better to go up three or five percent a year – every year, with the exception of deep recession times – than to hold firm for years and then go up 20 percent. Check the rate of inflation and local business conditions when making your pricing decisions.

Get rid of unprofitable clients: What are you doing spending your time working with the client who can’t or won’t pay enough to provide you with a profit? Unless this is a gift of love to a non-profit or similar, cut them loose. Maybe refer them to a brand-new firm that needs “any client at all.”

Banish unprofitable products and services: Why are you offering services or products that don’t profit you? Either raise your prices or eliminate those offerings. If you think they are serving as “loss-leaders,” take a very close look. Often, they are just losers.

Other methods of improving cash flow for the long run involve a deeper dive into enhancing profitability: Cut marginally productive employees, reduce office expenses, get rid of high-interest debt. These are topics for another day.


Michelle van Schouwen is principal of Q5 Analytics, providing advocacy and communications for climate change mitigation and adaptation. See Q5 For 32 years, Michelle was president of van Schouwen Associates, LLC (vSA), a B2B marketing company. In 2017, van Schouwen Associates was acquired by Six-Point Creative Works, Inc.  of Springfield, MA. Michelle is available for speaking engagements on topics including her work on climate crisis mitigation and Florida coastal water issues. She speaks to business and student groups about marketing launches and entrepreneurship and works with start-ups to support their development.

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