I was having a talk with one of the companies I work with, Hatch Media. We were talking about ways to improve cash flows, since this industry is pretty notorious for clients not paying on time. However, here, there was a consistent trend of the business paying it’s vendors on or before due dates. This is a classic error which ends up costing small businesses in a big way. The fact of the matter is, one should not be in business to ensure that the vendors whom the business uses, get paid on time. With slow inflow cash cycles, one needs to leverage vendor relationships, and negotiate terms where the firm does not cripple itself in the short term.

Examine your business outflows, and if possible, set goals to extend payment cycles to match your inflow cycles. Standard business expenses such as rent, are some key items you should do your best to negotiate better terms for. Sure the landlord will not be very happy with your proposal and may strongly refuse to negotiate. However, from his/her side, it is far more expensive to get a new tenant. Hence, use that as a bargaining chip to extend your rent deadlines, or even try to defer payment for a couple of months and pay a lump sum in the next quarter. The same methodology can be used for fixed raw material or supplies that need to be purchased to produce your product.

Do whatever you can to improve your short term cash cycles, thereby allowing for more breathing room to expand and grow your business. A business which is constantly strapped for cash and living from one pay cheque to the next, will not have the ability to innovate and look further than a quarter in advance. Get control of your business cash flows, and make sure you use whatever bargaining chips you can to get yourself in a better cash flow position.