I don’t know who coined the expression “cash is king,” but they certainly knew what they were talking about. Cash rules, always and forever, but even more so when the economy is soft. Cash = power. When you have it, it allows you to operate from a position of strength. Cash is not only money in the bank, but it is also a line of credit you have established and can draw
weather the storm. Studies show that most companies go out of business due to a lack of
capital.
have it, you can use it to negotiate more favorable prices. Why not offer prompt payment
in return for deeper discounts? For example, if you’ve been planning to upgrade your
equipment or software, this may be the best time to buy. (Bonus: due to recent changes in
tax law, you can now expense more of your purchases out rather than capitalize and
depreciate them, which can also translate to lower taxes…which in turn means more cash
left in your pocket.) Remember, the glass is also half full! This is not only true for
equipment. Negotiated payments can be used for inventory purchases, services, and all of
your business purchase activities. In other words, anywhere you spend a “buck.”
to slash prices in order to move inventory. Instead of discounting prices, why not extend
your payment terms instead? Right now, wouldn’t your cash-strapped accounts value
The Small Business Survival Guide
Customers are looking for extended payment terms. If you are in a position to offer them,
you can use this to get orders as well as new customers. (Care should be taken when
evaluating credit worthiness and total credit exposure, but the greater your gross profit
margin, the greater the opportunity.) Considering the current prime rate, this is more profitable for you, too. Assuming you pay 5-6% interest on your money, your cost is ½ of 1% for every 30 days you extend terms. That sure beats a 5% or 10% bite into profits! (By the way, as interest rates drop, some banks are starting to put a floor on their prime plus loans. If your bank asks for a floor on your loan, ask for a ceiling in turn, so you are protected against any rapid
increase in interest rates.)
needs, which means unusual opportunities may present themselves. For example, one of
your competitors may be going out of business. Hmmm, does the company have
equipment you can use? Or talented salespeople you might want to hire? If you have the
cash, you can seize the moment. Or better yet, can you buy the customer list and pay for
it with a percentage of these new customer purchases.
do you do that? You start by performing cash flow projections.
You can go further with this information by contacting Ray to help you go deeper into this subject how Ray mentors his membership. He’s always happy to help Small Business Owners, Presidents, and C-Level Executives strengthen their businesses and take them to the next level.
Set up a zoom meeting with Ray:
https://calendly.com/ray-124/
Or call: 312 593-5133
