The Trump Blog

 Cash flow is the number one headache for entrepreneurs. If more money is flowing out of your company than is flowing in, you could take a loan to temporarily correct the problem. But since borrowing can dig your enterprise into a deep hole, I would urge you to apply the remedies listed below. They will help you address the underlying problems instead of avoiding them:

Collect money up front. Depending on your industry, it might be customary for you to deliver your goods or services without being paid up front. But why shouldn’t you secure money from clients ahead of time, by asking for a third or a half of the total amount due upon signing an agreement? You can receive the balance upon delivery, because it pays to get as much as you can up front.

Collect accounts receivable. The most effective way to get paid is to keep track of what you are owed, without allowing invoices to get “stale.” Also remind customers of what they owe you and print the words “Remit in 30 Days” or, “Due Upon Receipt” on the invoices you send. And remember that because companies go out of business, getting paid promptly is sometimes the only way you can be assured of getting paid at all.

Stretch out the amount of time you have to pay your vendors. To avoid having to negotiate a timetable on every invoice, establish trade credit accounts with your vendors so you can repay an agreed-upon minimum amount each month.

Liquidate inventory. If you are in a cash flow crunch, liquidating or returning inventory or assets can raise cash quickly. I know one company that generated money quickly by selling a batch of slow-moving products on eBay.

Retain cash. Capture some of the cash that flows through your organization. Set it aside for those “rainy days” and you may never have to endure another cash flow crunch again.