A focused strategy also goes a long way toward achieving success. At Phoenix-based Copper State Communications, a telecommunications VAR with 80-plus employees and approximately $10 million in annual revenues, President Steve Sutton conducts credit checks, requires deposits for projects, and demands payment before switching on any system. Otherwise, he says, “If there is some kind of hiccup along the way, the client expects you to provide a fix and refuses to pay. Soon, you’re two or three months down the road and still haven’t received a check.”

Sutton also pays vendors as close to the due date as possible, but makes sure he doesn’t step over the terms of the deal. “We will take actions to improve our cash flow, but not endanger our credit standing,” he says. Whenever possible, he also negotiates payment terms and discounts to optimize cash flow. “If we can get a 2 percent discount on 15 or 20 days, we will usually do that. We will rarely agree to 2 percent on 10 days. It just doesn’t work for us.”

Other executives have developed their own strategies. For instance, at Consolidated The customer receives a discount and winds up paying less overall, and we receive the working capital to operate more smoothly and predictably,” Heitner says. Winter points out that some companies improve their financial standing by negotiating a larger up-front sum. Instead of a standard fee of one-third upon signing, one-third upon equipment delivery, and one-third upon completion, it’s sometimes possible to obtain 50 percent on signing and break the other two payments into 25 percent. “For smaller companies, it can help avoid the liquidity trap and problems associated with slow payments and industry downturns,” he explains.

Other executives have developed their own strategies. For instance at Consolidated Technologies Inc. (CTI), a Port Chester, N.Y., reseller and integrator for voice, Internet, and data products and services, sales reps must abide by standard terms and conditions, and cannot overstep these rules without highlevel authorization, explains President Kenny Heitner. Reps also don’t receive commission until the company collects on payments. CTI uses a dashboard application from 4-Profit to monitor performance and ensure that it is meeting established metrics. CTI doesn’t stop there, however. The firm also addresses fluctuations in cash flow with ongoing maintenance contracts. “These accounts help us with profitability as well as cash flow,” Heitner says. Instead of working on a project for months and then getting paid, the company watches a stream of fees trickle in every month. “Rather than selling a product on a one-time basis for $50,000, we may sell a five-year solution for $100,000.

Page 3 of 4 pages for this article « First  <  1 2 3 4 >