Wednesday, April 22, 2009

5 Ways to Improve Cash Flow In Your Printing Business

Given the current state of the printing industry and the economy, a healthy stream of cash is essential for a printing business is to succeed. Cash is the lifeblood of any printing business. In general, the key is to accelerate the flow of money coming in and delay the money that goes out. Here are 5 tips a printing business can use to improve cash flow.

1) Establish sound credit practices
Before dealing with a new customer, always get at least three trade references and a bank reference. Credit reports report on a company’s general financial health as well as how quickly (or slowly) it pays its bills. Never give credit until you are comfortable with a customer’s ability to pay.

Since many printers now provide email price quotes to their customers, a best practice is to incorporate your “Terms and Conditions of Sale” into your credit application.

2) Speed up throughput and delivery
Fill orders accurately and effectively, and then use the quickest means available to produce and deliver products to customers. Unnecessary delays can add days or weeks to customer payments. You must pay out considerable costs in paper, wages, and other expenses to produce orders, so you want to get reimbursed as soon as possible. Lean Office and Lean Manufacturing principles can help speedup your throughput.

3) Bill promptly and accurately
The faster you mail an invoice, the faster you can be paid. Where possible, send an invoice within 1 to 2 days after the order has shipped. A best practice is to establish the invoice amount at time of order or as the customer request changes. The only exception is billable overs and shipping charges. Many companies expediting the invoicing process by sending electronic invoices to customers using email, Electronic Data Interchange (EDI) or other means.

Check invoices for accuracy before mailing. All invoices should include a payment due date. An invoice without a payment due date may fall to the bottom of the customer’s pile of bills.

4) Offer discounts for prompt payment
Given an incentive, some customers will pay sooner rather than later. Trade discounts typically give 1% to 5% off the total amount due if customers pay in 10 to 15 days.

5) Aggressively follow up on past-due accounts
As soon as a bill becomes overdue, call the customer and ask when you can expect payment. Keep a record of the conversation and the customer’s response. Set a follow-up date in the event the promised payment is not received. Ask delinquent customers with legitimate financial problems to try and pay at least a small amount every week. Some accounting software packages functionality that automatically generates past due notices the day the invoice becomes past due.

When necessary, don’t hesitate to seek professional help from an attorney, debt collection agency, or the Printing Industry Financial Executive (PIFE) Credit & Collections Service.