invoice payment terms

Invoice payment terms: What are they and why are they important?

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Getting paid can be difficult for B2B businesses. Here’s what you need to know about invoice payment terms so you can maintain a consistent and healthy cash flow.

invoice payment terms

Fiscal needs vary from business to business. However, the need to get paid is consistent for every organization.

Invoice payment terms help ensure you get paid every time and on-time when you bill your clients. You can communicate when and how you expect to be paid for your product or service, indicate preferred payment methods and also outline policies for missed or late payments.

Why getting paid on time matters

Getting paid can be a challenge for many businesses in the B2B space. That’s because almost 63% of sales in the industry are made on credit.

This puts a lot of pressure on business owners and CFOs to come up with funding to run their business. That’s why they rely on invoice payment terms to create a predictable payment schedule that will allow them to calculate a precise cash flow.

Invoice payment terms are a crucial part of your billing as they can drastically reduce fiscal challenges and allow for better budgeting and financial forecasting.

What is the standard payment term on invoices?

Invoice payment terms indicate how you expect to get paid, and should include details such as:

  • the due date
  • accepted forms of payment (i.e. credit cards, check, electronic transfer, etc)
  • the preferred currency you deal in (when working with international clients)
  • charges for late-payment or missed-payment

You can customize payment terms based on the industry you operate in, and how your business is set up. However, here are 12 commonly used invoice payment term examples:

 

Invoice payment terms

Definition
Net 7 Payment is due seven days from the invoice date.
Net 21 Payment is due 21 days from the invoice date.
Net 30/60/90 Payment is due 30, 60 or 90 days from the invoice date.

Longer payment terms are common within certain industries. If customers require longer terms, the company could consider utilizing invoice factoring (see below) to accelerate needed cash flow into their business.
Upon Receipt Payment should be made immediately when the client receives the invoice.
PIA Payment in advance — the client must pay a certain amount upfront, before receiving the product/service. This can be a deposit or down payment.
COD Cash on delivery — also called “payable on receipt” is when clients are expected to pay at the time of product/service delivery.
Contra If your customer is also someone you do business with, you can use a contra invoice. A contra term offsets a sales invoice against a purchase invoice, or when a purchase invoice becomes a payment.
EOM Payment is due at the end of the month when the invoice is received.
CIA Cash in advance — the client must pay the full amount on the invoice before receiving a product or service.
15 MFI Payment must be made on the 15th of the following month of receiving the invoice. MFI means “month following invoice”.
2/10 Net 30 If a client is billed a Net 30 invoice, and they pay their balance in full within 10 days, they get a discount of two percent.
Interest Invoice Charge to clients for making a late payment or failing to make a payment.

Businesses apply this term if they want to encourage customers to make a one-time payment by the due date and to recover costs from an interruption in the payment schedule.

 

Invoice factoring is an alternative funding solution that allows you to sell an unpaid invoice to a third-party factoring company for a slight discount. Businesses that have to wait for one, two or three months to get paid often sell account receivables to inject and maintain cash flow. The business will get immediate working capital, not having to wait for the client to pay the invoice, and they will not incur any debt.

Using invoice terms to your advantage

Without proper invoice terms, your customers might fail to remember—or intentionally delay— paying you.

Choosing the right terms will not only protect you from payment negligence but can also make your clients take you seriously. Here are some best practices to remember when you’re setting up your terms or revamping your billing process:

  • Make sure the invoice is clear and easy to understand by the recipient. Using the standard invoice terms mentioned above will help you make it clear on your bill as to how your customers should pay you.
  • Your customers are business owners too, so be realistic and flexible about your terms and conditions.
  • Discuss late fees with your customers and come to a mutual understanding of what is acceptable and what’s not.
  • And lastly, don’t forget to thank your customers for their business!

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person. Learn more about the Liquid Capital Difference.

CFO-tips-for-cash-flow

Cash flow tips from top-performing CFOs

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Every CFO knows that cash is king! So give your company’s coffers the royal treatment with these top cash flow tips.

Cash flow tips for CFOs

Your cash flow forecast will be the life force of your future business strategy. And as your company grows, you’re likely taking on more debt or wracking up expenses—making it more challenging to get additional financing.

Don’t get backed into a cash flow corner. Here are some great cash flow tips from five CFOs that have been there before and their advice on cash flow management.

1. Prepare cash flow projections

Jonathan Gass – Founder & CEO – Nomad Financial

“A well-run business should build a 13-week cash flow forecast that takes into account the exact week in which a payment is expected to be either received or sent out. It gives management the ability to understand their cash needs over the next quarter and make smart decisions about how to manage their working capital and when to make active decisions to stretch it out.”

2. Manage cash flow with separate accounts

Jody Grunden – CFO – Summit CPA Group

“Most small businesses manage cash flow by looking at one master bank account. With just one account, it can be hard to stow money away for taxes or for other projected expenses. It can also be hard to understand the health of your cash flow on a regular basis. What I’ve found to work well is to have three separate accounts, each with a different purpose.”

Gain better control over your cash flow by using an operating cash account for everyday expenses, a cash reserve account for emergencies and a tax reserve account to ensure you have enough money to pay the taxman at the end of the year.

 

3. Allocate resources strategically

Brad Halverson, CFO of Caterpillar

“An important responsibility of a CFO is resource allocation — where the company is investing its time and money. To do this well, the CFO needs to first get their hands dirty in the field by gaining an understanding of where and how the company is positioned to compete for business by adding value to customers.”

4. Benchmark operations

Ken Goldman, CFO of Yahoo

“For a number of years, we benchmarked best practices. By tapping into both internal and external knowledge, we were able to better map accounting and transactional functions and measure their competitiveness and effectiveness across operations. Benchmarking every operation allowed us to compare and analyze so we could align our structure over time.”

5. Improve cash flow management

Eliana Salazar – CFO of AWE

“These four steps will help you improve your cash flow: ask for the longest payment terms possible, monitor the account receivables, consider alternative terms of financing, and constant negotiations with your suppliers and contractors.”

Bonus cash flow tip:

Know how to communicate the numbers

Carol Tomé, former CFO of Home Depot

«It’s one thing to know your numbers, but it’s another to make sure your teams, including fellow C-levels, the Board and investors, pay attention to the right ones.

During my first presentation to investors as Home Depot’s CFO, an investor on the front row fell asleep. He wasn’t fighting nodding off… he didn’t close his eyes for just a second… he didn’t have a glazed look in his eyes. He fell asleep and fell off his chair.

After that, I understood immediately that you can know the numbers and the strategies behind them better than anyone, but if you can’t communicate well and tell your company’s story in a way that engages the investor and analyst community, you are toast.

I vowed from that moment on to become a master of connecting with my audience, and it’s something I push my direct reports to do as well.»

 

Up Next: Ready to put these cash flow tips into action? Use these 7 proven cash flow tactics to manage your cash flow.

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Re-engage-your-contracts

Re-engage your contacts in the new virtual world

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Now is the perfect time to re-engage your contacts and develop new ones!

Re-engage-your-contracts

Due to the global pandemic, a new virtual world has developed, growing organically from the need for social distancing and remote work. However, we have also had to put a temporary hold on most traditional networking events, in-person meetings and even simple coffee get-togethers. 

Whether or not you’re a fan of networking, this has led to many business professionals becoming disengaged from their professional contacts. But this can be a critical—and avoidable—business error.

While we aren’t able to easily connect in-person, how can you keep in touch with your professional contacts? Here are three tips to get you started:

1. Get active on social

The key to being successful at virtual networking is to focus on the platforms where your contacts are most active and make those your priority. But don’t make the mistake of spreading yourself too thin. To follow an effective plan, the key is quality over quantity.

If you don’t already have a premium LinkedIn account, now’s the time to make the investment. LinkedIn premium accounts are offered at four tiers, so you can select one that fits your needs and budget. There are often 30-day free trials available if you’re still unsure about committing to a monthly subscription. If you have included other digital platforms (such as Twitter or message boards) in your virtual networking plan, look into upgrading your account to a premium subscription as well.

2. Participate in virtual networking events

Keep your ear to the ground for the opportunity to participate in virtual networking events such as virtual coffee chats or meetups, industry-specific webinars and online training or workshops. 

Can’t find any that meet your networking needs? Then start your own! Reach out to your close network and offer to organize a virtual networking event. Then encourage your contacts to invite two to three of their contacts to the event to help bring fresh ideas and faces to the event.

3. Don’t cancel your booked conferences

It may be tempting to cancel any in-person conferences you had booked, especially with current travel restrictions in place. But hold onto those conference tickets! With many conferences moving to a virtual model, you may miss out on a great opportunity to access valuable information and knowledge that you can share with your network.

Many virtual conferences are also providing on-demand content, which allows you to access panels, seminars and keynote speakers’ when you want. With this increase in flexibility for accessing conference content, you may even find it easier than ever before to share what you’ve learned with your network.

Up Next: Ready to create a virtual networking strategy that allows you to re-engage your contacts? Get started with our four-step process.

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

4 cash flow crisis management tips to avoid economic icebergs

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Avoid becoming the next Titanic-sized failure and gain control of your business finances with these cash flow crisis management tips.

cash flow crisis management

When the Titanic sank in April 1912, there were a variety of factors that caused one of the worst maritime disasters in history. Experts agree that it was a combination of human error and natural forces that led to the historical sinking. The ship was going too fast, the crew dismissed a critical iceberg warning (and then made a fatal wrong turn), key costs were cut that sacrificed safety and there was a lack of equipment including binoculars and lifeboats.

If you’re running a company during the recent pandemic, there are some important lessons to be learned from the history of the Titanic. The financial impact of economic downturns can be significant when sales start slowing down, contracts are delayed, supply chains are disrupted, customers can be lost and, ultimately, cash flow is affected.

To survive, many businesses will need to leverage cash flow crisis management strategies. Though you may not always be able to avoid the ‘icebergs’ ahead, you can plan and respond to changing market conditions proactively to minimize the impact on your business — and avoid disaster. 

Here are four cash flow crisis management tips that can help you minimize the impact of economic downturns on your business:

1. Update your cash flow forecasts

“Cash is king.” Considering that the cash cycle for many businesses is 90 days, it is essential to have a good understanding of your sales cycle in terms of lead times, purchase of raw materials and production of goods and services. Sales forecasting helps business owners understand where cash is going (and coming) from. It can also help you to establish a strong slush fund in case of slow periods of growth.

Thinking about the future of your business is critical to success. However, as the business grows, it can become harder to get additional financing due to the debt that the business has to take on. Evaluating your burn rate and runway, your marketing programs and expenses can help you make necessary adjustments to your cash flow forecasts.

2. Follow up on outstanding accounts receivable

In periods of economic downturn, it is important to get on top of your accounts receivable and make sure that you are getting paid on time. By carefully auditing your accounts receivable, you can achieve better financial flexibility to avoid economic icebergs in the waters.

Once you have a firm understanding of what accounts are outstanding, it’s time to follow up with those accounts and have them settle their invoices. It may also be worth considering and balancing the risks and rewards of adjusting your terms of payment.

Want to learn more about savvy bookkeeping tips for small businesses? Click here.

3. Review and adjust expenses

To achieve greater business resilience, it’s important to understand all of the liabilities for your business and to have a plan to reduce them. Evaluating what your fixed and variable costs are is a good way to start cutting costs.

Looking for areas of flexibility on your payroll, cutting redundant line items and considering time management strategies or tools are just a few ways that you can adjust your expenses and increase profitability.  

 

cash flow crisis management

4. Consider alternative financing options

Keep an eye on future planning and strategizing. As your business grows quickly or financial circumstances change, you can run into challenges getting additional financing through traditional funding options. 

Leveraging the power of alternative financing options such as Invoice Factoring, Asset-based Lending or PO Financing could be the life preserver your business needs. Alternative funding can also help to increase flexibility and long-term success while complementing your current traditional funding arrangements.

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Cut business expenses & improve profitability — Get these 6 tips!

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Be strategic when setting out to cut business expenses and you can fuel business continuity.

Cut business expenses

A penny saved is a penny earned…it’s a saying that’s all too familiar to most entrepreneurs. (After all, all those pennies can add up to some big dollar amounts.) It’s also an extremely useful piece of advice when managing your cash flow and trying to outlast or prepare for an economic downturn. 

Knowing what costs and when to cut is a balancing act that, if not properly executed, can put your business in jeopardy. However, when done correctly, it could help set you up for business success.

Goodbye emotions, hello strategy. Cut business expenses with clarity.

When making budget cuts —  big or small — be careful not to act on emotion or jump too quickly. Instead, take a strategic and analytical approach to deciding which line items can be adjusted or deleted completely.

So dust off your calculator, sharpen your pencils and pull out your company’s financials. Here are six areas that you should look at when starting to cut business expenses.

1. Cash flow: future and present

Creating a plan for where you think your business will go is crucial to future success. It helps you to understand where the business is going so you can future-proof it against economic uncertainties. But you can’t know where you’re going if you don’t know where you are starting from now. So the first step is to calculate your current cash flow and identify areas of improvement.

Start with part 1 of our cash conversion cycle blog series.

2. Audit both variable and fixed expenses

Once you understand how cash is flowing through your company, you can look at adjusting the speed at which it leaves your coffers. 

You may be surprised to find that expenses once considered fixed, are now variable, and can be reduced or cut. For instance, with the recent shift many companies have made to remote work, you may find that you can downsize or make a transition to a partial or fully remote workspace. 

When looking at cutting your variable expenses, think outside of the box (even the smallest line items can add up). Office supplies that you regularly ordered may no longer be needed when your workforce is at home. Speak with vendors to take advantage of discounts and adjust your delivery schedules where applicable. Improving relationships with suppliers combined with better inventory and supply chain management can reduce expenses.

3. Industry benchmarks

Measure your performance against industry standards, which will help you better understand how your business is doing in comparison to the averages. Once you know how you stack up, you can take action to separate your business from the competition and increase profits. This will also help you create target goals for the next quarter or year. Make sure to share those with the entire team, so they know what they need to collectively achieve.

Cut business expenses & improve profitability

4. Implement time management strategies and tools

Time is money, so make sure you and your employees are making the most of the workday. Using apps like Focus Booster or Rescue Time can keep your team on task and focused on results. It’s also important to set expectations within your organization for how long certain tasks should take so everyone is clear on how their time should be spent. 

5. New technology investments

Constant investments in new technology can yield long-term improvements along with more efficiencies across the business — and reduce costs over time. Focus on maximizing ROI when building your tech stack. 

Is that new project management software going to speed up your team’s workflow and will they use it? Would better accounting software spot costly errors and pay for itself? Would AI improve your inventory management, or should you invest in other areas with a more immediate return? Carefully select tech investments based on your business goals — and watch out for tech trends that are just a flash in the pan. When you need to cut business expenses, don’t be the guinea pig.

6.  Employee incentives to cut business expenses

Creating loyalty amongst your staff and offering creative ways to reduce waste can go a long way. Listening to your employees can give you further insight into areas that could be cut or reduced. It may even spark some creative solutions that you wouldn’t have necessarily thought of alone. Set up a brainstorming session or survey as a starting point, and you may even want to delegate a team to find efficiencies and cost savings. By rewarding them for their efforts, everyone wins!

About Liquid Capital

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital you’re talking directly to your funding source and a fellow business person.

 

Ready to cut business expenses today? Here are 5 more practical tips to spend money wisely. 

Bankers wear capes, too! How funding superheroes work together

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Alternative and traditional funding solutions unite to make the perfect financing team — working together to help clients at the bank and beyond!

Want to provide the ultimate level of customer service to your customers and potentials? It’s time to dust off your cape and join forces — Avengers style. 

The Avengers all had similar goals, but very different approaches, to saving the day. Yet, when they united for a common goal (like preventing a supervillain from world domination), they were unstoppable. 

The same goes for banks and alternative funding partners. Together, these forces are able to provide powerful funding solutions for customers of all types.

If you are a banker who specializes in helping businesses secure financing, then you know the incredible importance of creating and maintaining strong customer relationships. However, your meticulously cultivated relationship could be in jeopardy if your customer doesn’t qualify for a traditional loan. By working with an alternative funding partner, you can stop saying no and start saying yes!

Time to save the day

When a customer (or potential customer) comes to you for help, reassure them that you’ll do everything in your power to accommodate their needs. They came to you looking for a solution to their problem and although your bank may not be able to help, you can always offer them alternative lending options, working with a partner who understands the role you each play.

Keep villains at bay

If you aren’t familiar with all the options available to your customer, you leave them vulnerable to potential evil-doers. Not all ‘lenders’ are created equal. There are some who might entice business owners with promises of low rates and false credibility — but your client may not realize there are caveats including contractual constraints and hidden costs. 

Your reputation is on the line, so it’s crucial to feel confident with the referral partners your work alongside. Get to know their solutions and processes so that you can develop a high level of trust in advance.

Want an easy resource to explain invoice factoring to your client? Download this eBook and feel free to share. Invoice Factoring Guide.

Put competition aside for the greater good

It’s easy to think that bankers and alternative lenders are competitors (after all, both provide funding to businesses in need). However, as with superheroes, both want the best for their clients — and to ultimately satisfy their needs to grow their business. 

As a banker, having a trusted preferred alternative lending partner can greatly alleviate the stresses of not being able to traditionally accommodate a client. Often, clients don’t know which solutions best suit their business, so they’ll trust you to guide them. By leaning on the expertise of a lending partner who can, in turn, give you accurate advice quickly, it can help to secure prospects and retain clients.

Outline a bridging program – Avengers style

Every superhero has their strengths and weaknesses, but when they band together, they become an unstoppable force. Creating a program that bridges the gap can also help you to gain higher market shares and enhance your bank’s overall image. 

In the case that a prospect is desirable, but their financial status or length of time in business disqualifies them for traditional lending, creating a bridging program can go a long way to securing them as a future customer. 

Your alternative funding partner can also assist the bank in picking up the deposits and some of the ancillary services to start working with the client. As they become qualified for bank financing, they could transition into traditional commercial lending. 

In the instance of a current customer, they might be maximized on their line of credit. Alternative lenders can step in to fill the gap for as long as the client needs it. The lender can extract themselves when you say they can now be accommodated with traditional lending.

Alternative and traditional funding solutions unite

Teaming up with those who have your client’s interest at heart, provides you with more resources to save the day.

Depending on the industry, or the economic landscape, there may be a slower ramp-up to when a client is ready for traditional banking. But now, not only have you provided your clients with reassurance and a trusted ready solution for the present, but you have also created a roadmap for their future business growth, getting them where they need to be for traditional banking.

Do you have a client that hasn’t met all the criteria for lending? Send them this quick guide so they know what steps to take next.

Now if that’s not a hero, who knows what is?

With the Liquid Capital Bank Alliance Program, we help banks grow their market share and strengthen client relationships. Learn more about how this exclusive program can work for you and your customers here.

About Liquid Capital

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital you’re talking directly to your funding source and a fellow business person.

Business innovation

How to foster a culture of innovation in your company

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When the unexpected hits, fostering a culture of innovation within your small business can yield big results.

Culture of innovation

As this year’s world events began to unfold, many industries were hit hard — especially those who supply machinery to the aerospace and oil and gas industries. Those who worked to foster a culture of innovation have been able to forge ahead and keep their working capital flowing. 

Before the global pandemic even made its way to Canada, Machinery Experts Inc., a New Brunswick-based heavy equipment manufacturer, was already feeling the pinch from a protracted downturn in the oil and gas sector. Then COVID-19 hit, grounding air travel and drying up much of the company’s business from steel fabrication shops across Atlantic Canada. It also forced them to rethink how their sales team reached customers.

Like fellow business owners such as Bijan Bolouri of b.cycle, they had to quickly pivot and rethink their business model in order to survive the sudden downturn in sales. Fortunately, Chris Landry, president of Machinery Experts, knew that the key to surviving was through innovation. However, a misstep in strategy that put them in hot water meant they’d have to make another quick pivot and get back on the right track.

Here are three lessons for cultivating innovation, which Landry learned through experience during these unprecedented times. 

Missed the first 5 lessons on business innovation? Click here to catch up on part one.

 

Lesson 1: Turn lemons into lemonade

When life hands you a bag of lemons, you can turn them into something sweet — if you have the right frame of mind.

According to a recent study, the most resilient business leaders are also the most innovative, with 22% exhibiting higher innovation than their peers. They also reported having 19% higher cognitive flexibility and 18% higher team creativity. These skills are key drivers of success and are critical for overcoming the unexpected (and expected) obstacles that will come your way.  

For Landry and Machinery Experts, this has been a core strength of their business, even before the current downturn. Speaking about the repair business in a Natural Resources Magazine interview, “the bust times almost strengthen our business. Mining companies aren’t buying new assets, they are repairing current assets.” For the company, they knew that their services were needed even more when the economy turned downward, and that positioned them to prepare for future slumps.

Lesson 2: Own your mistakes

Creativity may not always translate to the market in the way it was intended — and when that happens, resilient leaders are able to bounce back quickly. 

For Landry, that creativity took the form of a billboard for Machinery Experts Inc., put up near a local beach to channel the fun, summery vibes they thought would appeal to passersbys. In reality, it was poorly received by many locals and Landry soon found himself inundated with calls for it to be removed. Realizing that his company’s billboard was not hitting the mark he had intended, Landry quickly jumped into action. The billboard was removed and Landry publicly apologized.  

Want to become a more resilient leader? Get these top tips.

 

Lesson 3: Respond to customers’ changing needs

Finding new ways to service the needs of your customers is a hallmark of a company with a culture of innovation — and that starts at the top. Resilient business owners are able to find new ways to use existing products and processes and are better at identifying areas of opportunity. In the case of Machinery Experts Inc., they were able to overcome setbacks by finding new areas to expand their business.

In the economic downturn, many steel fabrication plants were hesitant to purchase new machines, which can cost upwards of $500,000. Landry decided that a shift in the company’s focus from selling new machinery to providing long-term maintenance contracts and offering more used machinery (which costs between 30% and 50% less than new equipment) was what customers now needed.

“This is a revenue stream for us and it helps our customers because now they don’t have to deal with costly breakdowns,” the business leader explained.

 

Lesson 4: Enable your Sales team for the digital era

Machinery Experts’ successful pivot in response to changing customer demands means they are still operating in the black and are optimistic for the future. In recent months, the company’s sales of used equipment (which typically accounts for 20% of its revenue) doubled. They are also realizing gains from the newly launched maintenance services.

This wouldn’t have been possible without a quick pivot in the way their sales team is selling. Not only have the products and services adapted, but how they’re meeting with customers has, too. 

Leveraging the power of digital communication tools, such as Zoom, allowed salespeople to conduct meetings in a new way and let them showcase the machinery for sale. It also provided unexpected savings for their operating costs, as travel expenses were trimmed completely. 

“We can’t be the road warriors because you can’t cross the border, but that’s been a good thing in a way because we have the contacts,” Landry explains. Cold calling past customers has also provided a large boost to their sales slump. 

 

Even with these changes, it’s important to keep a realistic forecast. As Landry explains, “for the next couple of months, I just want to break even.” In the event of any unexpected market fluctuations, a conservative plan can keep your business moving forward.

 

Leadership first

This wouldn’t have been possible without a culture of innovation within the company, starting with its leader. Employees will embrace new ideas and ventures when leadership creates a space where innovation is encouraged.

You never know when the unexpected will happen, so fostering a culture of innovation within your business will help you come out on the other side.

Help me innovative with better cash flow

Experiencing a sudden influx of orders can be overwhelming even during the best of times. It’s important that you take preventive measures against experiencing a shortage of working capital by evaluating your cash flow and preparing for different financial scenarios. 

Even if you are incredibly diligent with maintaining your cash flow, there will still be times when you need extra working capital. Leveraging the power of alternative funding solutions can give you an advantage over the competition. 

 

To learn more about cash flow and smart cash for tactics read our 4 part cash conversion series:

Read Part 1: How to determine your company’s “cash conversion cycle”

Cash conversion cycle

Read Part 2: 7 proven cash flow tactics every CFO needs to know

 

Cash flow tactics for CFO

Read Part 3: Learn how to leverage your assets to grow your working capital

Grow your working capital

Read Part 4: Learn how to keep suppliers happy and cash in your pocket

 

About Liquid Capital

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital you’re talking directly to your funding source and a fellow business person.

Small business bookkeeping

7 small business bookkeeping tips for time-pressed business owners

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Is your small business bookkeeping taking too much time out of your already-busy day? Here are some quick tips to simplify your financial admin.

small business bookkeeping

Remember a time when it was so simple to sort your business receipts, bills, invoices and general paperwork? You might have just been getting started and spent a lot more time growing your business than you did organizing your books. But then you started selling more, got more customers, more paperwork flooded in and everything erupted!

Managing administrative work can become complicated as your business grows (especially if that growth happens quickly) and that once simple admin process can quickly escalate into a daunting challenge. 

Now, even a small error or oversight can impact your P&Ls, Income Statement, revenue projects — and snowball into a big end-of-year mistake that affects your payroll and taxes. So save your money, time and maybe even some gray hair by establishing an easy-to-follow bookkeeping process.

Here are seven essential bookkeeping practices that every small business owner should follow:

1. Separate your business and personal finances

This is essential for every business. Personal finances need to be kept separate from your business expenses, which is best done from the initial point of purchase. If not, you’ll end up with a mangled mess of expenses within multiple account statements to sort through and label at the end of the year. You also don’t want to end up with a shareholder account that is too high — forcing you to claim that ‘additional’ income all at once.

To limit the crossover, don’t use your personal credit card for work purchases and vice versa. However, this can happen from time to time (standing in the checkout line and realizing you don’t have your other card), so make a note of that and flag it immediately with your bookkeeper. It can be helpful to take a picture of the receipt just in case you misplace it along the way or invest in a small business bookkeeping mobile app 

 

Small business bookkeeping tips: Financial Statements

2. Document all expenses

No matter how small the expense, it’s important to track your purchases and payments. Whether it’s on a company credit card, debit account, by cheque or a cash payment, keep a record of those transactions. In addition, download your banking statements each month so you have a file of those for easy access on your hard drive. 

If you have a bookkeeper or admin person, ensure they have access to those statements and are reconciling every month — flagging any questions and clearing them up so you don’t have a backlog later in the year (when you might forget what happened months before.) This also helps you assess your business cash flow in real-time and understand where potential gaps may lie.

Related: 3 biggest financial challenges facing business owners

3. Schedule weekly bookkeeping time

Aside from the monthly reviews, set aside time in your calendar for weekly admin time. This could even be 30 minutes every Monday morning to update your Quickbooks or financial software, pay bills and review bank account balances. By making it a regular and easy task, you will feel more in control of your business financials and less intimidated at the end of the year when you need to dig into the dusty books.

 

Small business bookkeeping & accounting tips

4. Follow up on account receivables

Even more critical is ensuring the money owed to your business is coming in on time. Knowing when invoices should be paid and how that impacts your cash flow is critical to making future business decisions. Within your accounting software, ensure all invoices are entered with the right term dates. 

In your weekly bookkeeping time, review this section to see what has been paid, what’s coming due and, most importantly, what is past due. If you have a collections person or team, get them on the case asap. But if it’s just you managing the books, pick up the phone or send an email to follow-up on the payment. The personal touchpoint with the customer could help get payment quicker and further solidify a good relationship.

5. Monitor cash flow trends

The worst-case scenario in business is running out of cash at a pivotal time. By monitoring your accounts, knowing the seasonal trends in your industry and having a reliable projection for your business, you’ll be ready well in advance. So how do you do that?

Setting up a cash flow statement and budget is step one. (You can follow the steps here.) Next, calculate your DSO, DPO and DIO as part of your cash conversion cycle, which can reveal a host of opportunities and potential roadblocks in your way. Look for warning signs such as taking too long to pay suppliers, changes in sales or customer reorders, or even unusual spikes and dips in payroll. Anything out of the ordinary could warrant a little extra attention.

 

Small business bookkeeping & outsourcing to a professional

6. Outsource to a trusted pro

Despite your best intentions, sometimes the admin work for your business will still be your last priority. Getting help on these steps ensures that things are managed proficiently — freeing you up to spend more time on running the sales, service and operations of your company. 

If you don’t yet have a bookkeeper, look into adding this role (even part-time or on contract), which could save you countless hours. Your accountant may offer this service already or offer a referral to their trusted network, so start with a conversation with the professionals already on your team. 

When it comes to your accounts receivables and collections, when getting financing through invoice factoring at Liquid Capital, our team will also take care of that portion for you. 

Here are additional benefits of invoice factoring.

 

7. Reconcile monthly

This one is so important that it gets its own section. Reconcile all your paperwork and books once a month, along with your accountant and bookkeeper (as applicable). By reconciling monthly, you’ll catch errors associated with cash inflows and outflows earlier, keep accurate up-to-date records and be ready for financing if you’re ever in need. 

Staying on top of the admin will alleviate stress, a much-needed relief for most business owners, and prepare you for those unexpected surprises that are around every corner. 

 

Learn how to become lender friendly in our free eBook here. Get instant access with no download needed.

 

At Liquid Capital, we understand what it takes for small, medium, and emerging mid-market businesses to succeed – because we’re business people ourselves. Our company is built on a network of locally owned and operated Principal Offices, so whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

resilience

Why every business owner’s most valuable asset is resilience

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As a business leader, can you overcome adversity & daily pressures? Here’s why your resilience matters most & how to bounce back.

Resilience is a business leader's greatest strength

As far as inspirational commencement speeches go, it was a bit of a shocker.

When chief justice John Roberts of the United States Supreme Court addressed a graduating class in 2017, he wished them … bad luck.

“From time to time in the years to come, I hope you will be treated unfairly so that you will come to know the value of justice,” he said. “I wish you bad luck, again, from time to time so that you will be conscious of the role of chance in life and understand that your success is not completely deserved and that the failure of others is not completely deserved either.”

Only by experiencing adversity, Roberts suggested, can we develop the crucial quality we need to get us through it: resilience.

From Nietzsche to Kelly Clarkson

As a business leader, being ‘resilient’ allows you to “withstand or recover quickly from difficult conditions,” which you may face both internally and externally. An economic downturn, a market disruption, a botched expansion. A cancelled contract, an inventory snafu, a product that sinks like a stone. Unpaid invoices, unforeseen logistical roadblocks, or an employee who is underperforming.

How do you muster up the strength and courage to face the daily onslaught of challenges? Some will chalk it up to ‘entrepreneurial spirit,’ but author and psychologist, George Kohlrieser, points to resilience as the key. He defines this quality a step further, as it pertains to corporate and organizational leadership: 

“Resilience is the human capacity to meet adversity, setbacks and trauma, and then recover from them in order to live life fully. Resilient leaders have the ability to sustain their energy level under pressure, to cope with disruptive changes and adapt. They bounce back from setbacks. They also overcome major difficulties without engaging in dysfunctional behavior or harming others.”

To paraphrase Nietzsche – and a Kelly Clarkson song — “what doesn’t kill you makes you stronger.”

So what does resilient leadership look like? These snapshots may give you an idea. 

Business failure

Accept (and expect) failure 

Before launching New Coke, Coca-Cola CEO Roberto Goizueta conducted blind taste tests with nearly 200,000 consumers. After New Coke aced those tests, it hit the market on April 23, 1985. 

But New Coke fell flat. Coca-Cola was bombarded with thousands of angry calls and letters demanding the return of the original flavor. Just 79 days after introducing New Coke, Goizueta owned up to his mistake and brought the ‘old’ Coke back.

What went wrong? People’s hearts – their intense emotions about a century-old brand – simply overruled their taste buds. Goizueta learned that even if your business seemingly takes all the right steps (remember the 200,000 blind taste tests?) things can still go horribly wrong.

Despite your best planning and execution, failure will sometimes happen. Accept that. Expect that. And if it happens to you, learn from it.

Resilience is about being realistic

For James Stockdale, former U.S. vice-presidential candidate and high-ranking naval officer, taking a realistic view proved to be his saving grace. Although Stockdale survived seven years of torture and imprisonment during the Vietnam War, many of his fellow POWs tragically did not. 

As he explained to now famous business author Jim Collins, the most optimistic prisoners were, surprisingly, the least likely to make it out alive:

“They were the ones who said, ‘We’re going to be out by Christmas.’ And Christmas would come, and Christmas would go. Then they’d say, ‘We’re going to be out by Easter.’ And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.”

Collins calls this the Stockdale Paradox, and warns business leaders of its dangers in his bestselling book Good To Great. As he further explains, “you must never confuse faith that you will prevail in the end — which you can never afford to lose — with the discipline to confront the most brutal facts of your current reality, whatever they may be.”

Being resilient means being realistic about your situation, not deluding yourself with false optimism.

Hit your business goals

It’s not about being ‘perfect’

Roy Halladay won a lot of things, including two Cy Young Awards and a place in the Baseball Hall of Fame. Yet the pitcher’s relentless pursuit of perfection cost him his life.

After Halladay fatally crashed his small plane in 2017, an autopsy revealed morphine, alcohol, antidepressants and amphetamines in his system. How could someone so perfectly in control out on the baseball field spiral so out of control in his life?

Biographer Todd Zolecki says Halladay’s constant overtraining and insistence on playing for decades after a spinal fracture, ultimately led to his addiction and downfall. “Because he was so determined, he just felt like he needed to push through it, even though he was in such tremendous pain. But he just couldn’t walk away. He could never turn off the ‘I have to go max effort’ switch,” as Zolecki explained.

In the battle of resilience vs. perfection, the baseball star’s loved ones could see he was not able to overcome and bounce back. Brandy Halladay told Zolecki her husband’s quest for a perfect career took a toll on the most important team of all – his family. As she described, “everyone else [was] getting the hero and we’re getting what’s left over.” Instead of even spending time with their kids, he was left struggling with his physical and emotional pain. 

Extinguish flames

Extinguish your inner saboteur

When we experience a rough patch, it’s often easy to dig yourself a hole and focus only on the negative side of things. Author and business coach Paula Hope defines this as your inner “Saboteur” as she explains in her book focused on conquering negative thoughts that can equally impact your sales revenue.

“A Saboteur, in the context of new business development and the business professional who offers their professional services, is a negative thought, or series of thoughts, that create a level of emotional discomfort for the business professional.” 

Part of being resilient, as we have now come to understand, is to be able to overcome being knocked down. It’s important, regardless of the Saboteur’s intensity, that you don’t let it affect your confidence as well as your business performance. You will not be able to move forward without ridding yourself of those personal fears and doubts.

Business leaders ask for help

Don’t be afraid to ask for help

Perfection is impossible. Instead, reach for the inner strength to bounce back, instead of bending to the point where you (or those around you) completely break. Take care of yourself personally as well as professionally. And when you need help, reach out for it.

 

Next up: How asset-based lending work

Business owners and entrepreneurs will undoubtedly face financing issues and new opportunities requiring access to working capital. If you are searching for ways to overcome one of these challenges, reach out and we’ll provide you with information and options to explore. 

Images from Pexels, and Pixabay

selling PPE

Selling PPE? Follow these steps to secure funding

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What a time to be in this business. Whether you were already selling PPE in the past or not, you may have found that you’ve somehow fallen into the space.

selling PPE

 

Orders are flying fast and furious for face masks, shields, gowns, gloves and that ever-critical hand sanitizer! From cities and government offices to private companies and industry organizations  — everyone is placing an order.

You may have all the supplier and trade connections to secure PPE inventory, but not enough working capital to close the deals. So how do you make sure you can deliver — especially if you’re presented with a surprise PO?

Here are six tips to help you access funds:

 

fake deal

Tip 1: Make sure the deal is legitimate!

There are a lot of fake deals and scammers out there, especially when selling PPE. Nefarious people are quick to take advantage of an industry in hot demand, so do your due diligence to ensure whoever you’re talking to has a credible business. Get professional help at this step, and ask your lawyer, banker, collection firm or other partners to do required background checks and extra investigation.

 

funding options

Tip 2: Investigate your funding options

You likely already have a banker on your side, and that can often be step one. But if you have a maxed-out line of credit, or a loan that can’t be extended, how will you get more funds released to make a new deal go through? Check out your options such as government programs (many are listed here), the CDFI Fund, community lenders and alternative lenders such as us here at Liquid Capital. We are happy to work alongside your banker.

 

funding partners

Tip 3: Connect your banker and your alternative lender

This step will benefit you greatly, for two main reasons…

1) It tells you that both your banker and your alternative lender are the trustworthy partners you need right now. They’ll be working together, in partnership, to help your business get the much-needed access to cash — as quickly as possible. If they aren’t willing to work together, you’ve got the wrong people on your side.

2) It gets you out of the weeds. You’ll have a lot more to focus on to close a PPE deal quickly, so having to be involved in the nitty-gritty of every aspect of financing decisions between the banker and lender would take up a lot of your time. Meet with them regularly, of course, but make sure they connect even more often to power through the details.

 

clever

Tip 4: Get clever about order on receivables

When you’re dealing with large financing deals and multiple partners, you’ll no doubt hear about the order in which your lender and banker will need to be placed on your receivables — also known as the subordination agreement. This might not be your decision ultimately, but don’t let this be a deal-breaker.

While your original financing partner may have first position, a new lender may also require they take this top spot. Someone’s got to give, but there are different ways of structuring deals, and you could suggest a split in the territory or some other method of segmenting the positions. For example, a second lender may be able to only take first position in one State, while the original lender retains first position across the rest of the globe.

 

Related: Learn how to become lender friendly and why you should perform a UCC search on your own company.

 

speed red flag

Tip 5: Speed is important, but too fast could be a red flag.

If you’re supplying PPE, your client likely wants their shipment yesterday. That will put some major urgency on your financing. If you’re structuring a PO financing or invoice factoring deal, for example, these can be done relatively quickly — but it will save you time, money and headaches in the long run if you go through the proper steps. If a lender promises they can rush this beyond a believable timeframe, be wary. You don’t want to get into a situation where you actually end up owing on payday loans or merchant cash advances — with enormously high rates.

 

deal

Tip 6: Line up an expert now, even before you have a deal

You might not yet have a PO, but the moment you do, you’ll want to have a trusted partner on stand by. If you’re currently selling PPE (or could be) — or your company does business for any essential service — start talking to new lenders now. Find out what solutions they offer, how they can structure deals, what other industries they work with, and their history of funding businesses like yours. Short-list the ones you think could help you, and you’ll be that much more prepared when a new client comes knocking on your door with the next big order.

 

Next up: How asset-based lending works

 

About Liquid Capital

At Liquid Capital, we work with clients who are selling PPE and those in other essential service industries — supply chains, food services, financial services, manufacturing, transportation services, construction, and resources and energy. Whether you’re currently operating from a virtual home office, or you’ve shifted back to the busy downtown hustle and bustle, we know business can’t stop. We’re business people ourselves, and our company is built on a network of locally owned and operated Principal offices. Whenever you’re talking to Liquid Capital, you’re talking directly to your funding source and a fellow business person.

Images from Pexels, and Pixabay