by Corinne Colbert
Cash is to a new business what blood is to the human body: If it doesn’t keep flowing, things begin to falter. And nothing can block cash flow like customers who don’t pay on time – or at all.
Just ask Lisa Ison, president of The New Century Venture Center in Roanoke, Va. A former incubator client scored the promise of a six-figure service contract with a local hotel. The client did a lot of work – but then the hotel cancelled its order. And because the client didn’t have a contract with the hotel, the client never got paid.
Although the problem didn’t shut down the business, it very well could have, Ison says. “Most of the time, people go out of business not because they don’t have a good idea, but because they can’t manage their cash flow,” she says.
Many entrepreneurs err right from the start. Ison says lots of her clients begin selling without establishing credit and payment policies and procedures, or sell to friends and family assuming that they’ll pay up. Another common mistake is assuming that everyone will pay when they’re supposed to, says David Sher, CEO of AmSher Receivables Management, a collections firm in Birmingham, Ala.
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Keywords: accounting/financial management -- client, company failure and dissolution, marketing/sales
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