Just about anybody who owns and operates a business would agree that there are plenty of appealing reasons for running your own show that are separate from financial gain. The autonomy and independence of self-employment; the freedom to keep flexible hours (though this one usually comes only after some hard-won profitability is established); the satisfaction of conceiving and building something of your own – these are just some of the perks of being the boss.
Income from the business, though, is the way that most business owners put food on the table and pay their families’ bills. No matter how exciting and challenging the operating of the business can be, nobody’s doing it as a hobby, or as a way to waste time and effort. It’s not a small business (or won’t be for long) if it’s not generating cash for its owners.
So, why does collecting what is legitimately owed the business often fall down the list of priorities for some business owners?
It’s more prevalent than you’d think. Mom’s Pop Shoppe has a stellar business plan, creative and innovative marketing efforts, great client relationships and retention, diligent customer service and follow-up. Sales have increased for several consecutive quarters. Yet Mom’s is chronically behind on vendor payments, their line of credit is topped out, and the owners take a paycheck infrequently. Why? One place to look could be the accounts receivable sheet.
If the receivables of the business are not turning over continually, with little or no aging, cash is not flowing through the way it needs to. Think of it this way: your business has done NO business until it completes a transaction by collecting the money owed for that transaction. Sales make for glamorous reports and are cause for celebration, but they can become an end in and of themselves and not the means by which income is generated.
You can love your business, but unless you feed it the cash it needs, it won’t love you back. Take care not to fall into the trap of making your product (or providing your service or plying your trade) only for the sheer thrill of it. Take pride and satisfaction in your business, but be diligent about completing the transaction – collect what’s due you!
Do this by earning it, by satisfying and exceeding your customer’s expectations. Do it by setting clear payment terms and insisting that the terms are met. Do it by paying attention when a client’s payment goes overdue, and by making some noise about it. Your business can’t live without it.
