Thursday, June 11, 2009

Guest Blogger Arun Sinha always has something pithy to say...

...and this time it is on one of my favorite subjects, cash flow:


Cash flow blues


A friend from one of my networking groups told me about a cash-flow crunch he found himself in, through nobody's fault. He has a 3-person firm, and like many small businesses, he gets the bulk of his revenues from one client. Currently, about 62% of his sales come from his largest client.

Sometime in December 2008 he sent this client his monthly invoice via email as usual. 30 days passed, and he hadn't received his check. Since this was a huge client, my friend was treading very softly around them. He didn't ask about his payment until another 10 days.

Client said, "We never got the invoice." There had been a glitch in their email system. Some incoming emails were lost, some weren't. Guess which email was lost.

So my friend sends the invoice out again. By now it's getting close to February 09. He has depleted his rainy day fund, so he draws on his line of credit at his bank so he can make his payroll and utilities.

Meanwhile, the client's business has slowed, so they don't pay in 10 days like they used to. They take the full 30 days. Which means my friend finally gets his check a little over 70 days after emailing his invoice. Then, because it's an out-of-state check, he waits another 7 calendar days for the money to land in his account.

There are a couple of lessons from this saga: Don't rely on one big client and one big check. Things can go wrong without malice on anyone's part. You always need more in your rainy day fund than you think.


I have had the pleasure of networking with Arun for over 6 years. I value his judgment and input. Arun's copywriting skills are shown well on his website http://www.AccessConsultingInc.com and his blogs are:
Envirobuzz and AccessNotes.

Both are worth subscribing and reading. Thanks, Arun!