Accelerate cash flow when profit does not come fast enough

1. Where you stand when you get here

The owner at this point has the leads, the sales and the profit, and just needs the cash to come in. If the cash were there, the business could scale. The other three branches of the money question, cheaper leads, better sales and more profit per customer, are SOP 197 — Solve a leads, sales or profit-per-customer problem. They are not repeated here.

2. Push out your vendor terms

You can do this, especially if your business is one of the bigger ones.

• Set your standard with vendors. Tell them how you do things: you pay everything net thirty, which is glossed as the vendor delivering and you paying at the end of the month.
• Use the relationship. It tends to work better once you already have relationships with the businesses you buy from. They are typically not willing to lose your business.
• Do it across the board. Push the terms out with every vendor and cash flow across the whole business speeds up by 30 days.

For the other side of it, paying core vendors on time, see SOP 154 — Get granular financial data, section 5.

3. Change your payment terms

Under payment terms, three or four different tactics are offered.

3.1 Make quarterly the core offer

This one is for anyone selling something recurring. People with cash-flow problems tend to sell something recurring or longer in nature, typically, rather than one-time transactions; so this applies to you.

• Stop leading with month-to-month. Make quarterly the primary offer.
• Give annual a discount.
• Price month-to-month higher.

That single change can speed up cash flow: each payment now covers three months instead of one.

3.2 Present from high to low

You can always present from the top price down. One practice here, whenever presenting, is to state the total price first, interest and everything else included, and then ask whether the buyer would like to save money; the saving comes from prepaying more of it.

For a year of service, say, the anchor is the month-to-month price, installments and interest included. Then comes the saving: prepay, and pay less. From there you can start stepping down. What the step-downs are is not established on this page.

The same order, worked through with figures, is rung 1 of SOP 70 — Work the payment-plan downsell ladder.

3.3 Offer layaway

The view here is that layaway remains a wildly underrated method, and why people do not use it is, in this view, a puzzle.

• The customer starts paying now.
• When they have finished paying, or when they have paid half of what they owe, you start the work.

That is the whole method: they pay and then they receive, rather than you delivering and then waiting to be paid. Layaway also sits on rung 2 of SOP 70, with a case from a software business.

3.4 Why being paid first matters

The leverage you have with the other side is set by where payment falls against delivery.

Nobody has surgery and then tells the surgeon they will pay afterward; it does not work that way. The exception offered is insurance companies: they do pay doctors afterward, since it is the insurers who hold leverage over the doctors. When you pay a doctor yourself, you pay first, because the doctor holds leverage over you. Who pays first follows who holds the leverage, and a business that wants to be paid first has to carry itself like one that holds it.

4. Give people a reason to prepay

The view here is that a lot of owners are missing out on this one.

How to give a reason. Give people more good things, or take bad things away.

The usual gap. Sometimes an owner says cash flow really has to speed up. Asked what the incentive to prepay is, the owner has none. With no reason to prepay on offer, nobody should be surprised that customers do not prepay. If you want cash sooner, you have to reward the prepayment.

A guarantee that comes with prepaying. This is called one of the first really strong prepayment structures you can build and offer. If you offer a guarantee (not everyone does), tell the customer they get the guarantee if they prepay. If they do not prepay, the guarantee comes off. It is called very compelling, and the recommendation here, if you are asking how to speed things up, is to put it in.

Setting up a guarantee in the first place is SOP 7 — Choose and condition a guarantee. Taking the guarantee out as a feature downsell, in the setting of a price objection, is SOP 73 — Feature-downsell customers before they cancel.

5. Charge fees up front

Setup, onboarding and one-time fees, and anything like them, this is where they go: you can simply load them at the front.

Do you need a reason for a one-time fee? No. Permission is all it takes, and you already have it. It is your business, and you set its rules.

A fee at the front, seen as a way to shorten the payback period, is on SOP 57 — Compute the payback period and shorten it, section 7.

6. Add buy now, pay later

If you can get a third-party buy-now-pay-later provider, add one.

The figures given. You will typically get about a 35 percent increase, going by the provider's own figures. That figure is also given as what one company got, because it has a more affluent customer, and then as what a typical business that puts some form of buy now, pay later in place gets: like a 35 percent boost in sales. The two are set side by side under what this page does not decide.

Third-party financing as a rung of the payment ladder is on SOP 70, rung 2.

7. Finance your receivables

This is the last of them. The list runs kind of in order of complexity.

Who it suits. If you are in a business a bank understands very well, construction for instance, or an ordinary business where the outflows are clear and the likelihood that customers pay you is very high, then banks run a whole division that does accounts receivable financing.

The case given. In one example, an investor had been weighing an investment in a company that had stalled at like two or three million dollars a year, a figure given as uncertain. It carried a lot of debt and was really struggling. About 18 months later, the investor got back in touch with the founder, who said they were doing $5 million a month. Asked what unlocked it, the founder said they had won net 90 terms from one of their vendors, and that alone did it.

How it is read here. That works exactly the same as receivables financing; it is simply done by a vendor instead of a bank. Both are things you can negotiate.

Lending law and financing terms are not covered on this page.

8. What this page does not decide for you

• How many moves there are. They are counted as seven different ways, then as nine, because the second point had three points inside it, and so more. Only vendor terms and payment terms are numbered, and the prepay incentive may be a tactic under payment terms or a move of its own. This page does not settle which reading is right.
• Whose 35 percent. The figure is given as what one company got because of a more affluent customer, and then as what a typical business gets. This page does not settle which reading is right.
• What the step-downs after the anchor are. Not established on this page.

9. The checklist

Step	What to do
1	Confirm the money question ended at its last branch: profit is fine, it arrives too slowly (SOP 196)
2	Push vendor terms out to net thirty with every vendor, especially if yours is a bigger business
3	For recurring offers, make quarterly the primary offer, discount annual, charge more for month-to-month
4	You can present from the full price down, then offer a saving for prepaying
5	Offer layaway: work starts when they finish paying, or once half is paid
6	Give a reason to prepay; if you offer a guarantee, tie it to prepaying
7	You can load setup, onboarding and one-time fees at the front
8	If you can, add a third-party buy-now-pay-later provider
9	If a bank would understand your business well, look at receivables financing, or ask a vendor for longer terms

10. Where this sits

• The order of questions that leads to money, and where money comes in it: SOP 184.
• Prepaying offered to customers already on continuity: SOP 74 — Price continuity against upfront cash, section 10.
• A campaign that brings in cash quickly from existing customers: SOP 81 — Run a fast-cash campaign.
• Re-shopping what you buy from vendors: SOP 171 — Cleanse expenses, re-shop vendors and move cash into yield accounts.

11. What this page does not cover

Lending law and financing terms are not covered on this page. The fixes for leads, sales and profit per customer are not covered on this page.