Posts Tagged ‘policy’

Have A Down Payment Pricing Policy To Speed Up Cash Flow

June 29, 2010

by Doug Smith, President, The Woodhaven Group

Does your business perform a unique service or make a custom-made product?  If so, start including a down payment requirement when quoting a price for services or products.  This will dramatically speed up your business cash flow.  Combine this with extended terms from suppliers and that line of credit at the bank may not be needed.

Many companies are reluctant to ask for a down payment out of fear that it will upset the customer.  Our society has trained customers to expect to pay a down payment when purchasing certain products and services.  Most consumers would expect to be asked for a down payment when purchasing a home or car.  Unless your business is a retail transaction in a store where the customer gets the product immediately (ie:  restaurent, drug store, oil change, etc.), then try this tip and see your business cash flow take off.

It should always be a policy that any custom product or service  should require up to 50% down payment.  These funds early in the transaction can be used to offset materials & labor, marketing, and sales cost.  Or, just put the cash in your bank account and earn interest.  By receiving a down payment it also shows commitment on the part of the buyer.

Examples of a few products or services that should be getting up front down payments are:

  • Landscaping projects
  • Website design
  • Home or commercial remodeling of any kind
  • Caterers
  • Interior decorators
  • Direct mail design and production
  • Tailoring
  • Machine shops
  • Excavation
  • Dock repair or replacement
  • Mold remediation

Always make sure a complete purchase order or contract is signed by both parties spelling out the contract price, amount of down payment and balance owing so there is no misunderstanding at the end of the job how much the final payment will be.

Put this pricing policy in place today and watch your business cash flow immediately increase.

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Halt Next Day Delivery And Increase Your Business Cash Flow

June 18, 2010

by Doug Smith, President, The Woodhaven Group

It’s the little things that can blow a hole in your business cash flow.

Take for instance next day delivery.  As much as I like and am impressed by the efficiency of FedEx and UPS to deliver a letter or package overnight, I see too many businesses that still spend extra cash overnighting documents that can be sent using less expensive options. You should take time to identify how much this expense is costing your company annually.  You will be surprised how high it is.  

My suggestion is to establish a written policy of what documents must be overnighted such as a proposal that must meet a deadline in order to get an important sale.  Instead of overnighting a check for the payment of an invoice, use an ACH payment process if it absolutely has to arrive by the next day. 

Other correspondence can be sent by regular mail and should arrive in 3-5 days which, I have found, is sufficient for most business transactions that has to arrive as a hard copy.  In most cases business correspondence can be sent by fax or email attachment.

Don’t underestimate the potential cash savings by doing this.  If your employees still overnight documents instead of the less expensive options available, then you may find there are thousands of dollars that can be put to better use growing your market share.