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Somewhere over the rainbow

Business talk with Steve Elsom, September 2020

Amazing how prophetic songs can turn out to be…..the Wizard of Oz classic, sung by Judy Garland (more than 80 years ago!), contains the line, “I see friends shaking hands saying – how’s it? how’s you?”. Wowser – nobody shakes hands any more….it’s so ‘last year’, and as for asking after someone’s wellbeing… hasn’t that given way to a culture of ‘I’m alright Jack’ selfishness? Having said that, can being selfish in business be a good thing?

Take your business cashflow. How many of us end up chasing invoices? It says 30 days… not 30 weeks! Oh, the cheques in the post, the signatory to the account is on holiday, we are in the midst of an office re-organisation and we’ve mislaid the cheque book.
I’ve heard them all. Yet, on the other side of the fence, I diligently make the electronic bank payments to my local council for my business rates, I pay my tax to HMRC on the due date, I tax and insure my car on the due date, and I pay my suppliers on the due date. Perhaps, I need to be more selfish.

I worked with a manufacturing client last year and we modelled their cashflows. By slowing down the payment to their main supplier by just seven days… we created a positive impact of £25,000 to their working capital requirement. We modelled a bit more and ascertained that their main competitor was paying the same supplier in 37 days (on average). My client was paying in 30 days. Had we ever asked to vary the payment terms? No. So as I sat in their office, my client called the supplier, explained that he
had been a loyal customer over several years, had an impeccable track record re invoice payments, but could do with a little ‘breathing space – latitude’ on the current terms and could they extend his credit terms by 7 days. The supplier duly obliged and even thanked my client for his custom over the years. Great result all round!

So, can you become more selfish in business? Maybe seek to vary the terms of trade, and if your terms are currently ‘30 days’, why pay in ‘15 days’ if it results in pressurising your cashflow? Remember, in business – ‘Turnover is vanity, Cash is king’.

Once you have looked objectively (or maybe ‘selfishly’) at your payment rhythms, assess what difference a minor tweak might make to your cashflow. I suggested that this particular client also ask his bank to change the date of their monthly loan repayment from the last day of the month, to the first day of the month… so as the loan payment would coincide with his 1st monthly trade receipts. He explained the impact on his cashflow to the bank, they listened, they agreed. Great result all round – again!

If you would like me to have a look at your cashflow and see if we can make some modifications on timings alone that might save you money, and help you possibly find that crock of gold at the end of the rainbow….please do contact me.

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Steve is a regular contributor to B2B publications, see some of his recent articles for insights into current business news, leadership and much more...