Easing out of Recession not so Easy for Small Service Companies

Very recently, several of my clients have begun sharing that their sales have turned up over the last couple months. Yeah, finally! Since I talk to business owners every day, and no one has expressed that sales are getting worse, this constitutes a trend, albeit an unscientific one. But, hey, any good news brings a sigh of relief at this point.

With sales up and seeing your business operate in the black, at least on paper, you might think your troubles would be over soon. Not to burst your bubble, but don’t forget about a brand new kind of cash flow squeeze. How could such a squeeze be new when you’ve already been dealing with cash deficit issues for well over a year?

During the recession, clients who pay an invoice began paying slower. Now with your sales going up, your expenses are probably going up too. So while your sales and billings might increase, the number of days to get paid has gotten longer. This is causing the new kind of cash squeeze. One where expenses go up because but the cash to pay for those sales doesn’t come in until 30 to 45 days later. Before the recession took hold your invoices might have been paid in 15 to 30 days. Now, you are carrying additional cost with slower pay and may already have drawn upon your credit line too much for comfort. This leaves you squeezed in a new and more uncomfortable ways even as your sales look more promising.

So, how do you compensate?

1) Your cost cutting days may not be over, even with light on the horizon and sales increasing.

2) Yes, delaying your own payments may still be necessary.

3) Invoice more often, for partial payments at start of contract and at delivery points.

4) Drawing on your credit line may be required even if you were lucky enough to have avoided it so far.

5) Get creative, or call me and we’ll get creative together.

And lastly, don’t forget to count your blessings. Slashing of prices just to stay competitive may soon be over. Wondering when it will end is a thing of the past. You survived the Great Recession of 2008-2009. And while you may never return to the glory days of 2004-2005-2006, you are now better prepared. Remember, good habits get formed in bad times, but we get to keep those good habits forever.

Now stop reading about recovering from the recession and start doing! Let’s create your personal profit strategies for growing profit. Call small business profitability coach Merra Lee Moffitt, CFP®. She can be reached at, 888-920-2030 or by email at merralee@captureprofits.com.

This entry was posted on Friday, October 30th, 2009 at 10:28 pm and is filed under Collect Cash, Increase Sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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