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. 

BANKING ON IT
How a business approaches banking plays a role in cash management as well. A zero-balance account often boosts operating cash and maximizes returns on the capital, for example. It sweeps funds into a savings account or applies them against an equity line—usually at the end of each business day. Another strategy is a dedicated depository account. Before each payroll period, a company deposits only the funds required to make the run. This helps avoid idle funds parked in a noninterest-bearing account while reducing the risk of payroll check fraud.

Kronenberg takes a holistic approach to cash management. He uses credit checks and Dun & Bradstreet reports to understand a potential customer’s ability to pay. He calculates the carrying cost for products and services and establishes credit terms that match the circumstances, and the risk, for a particular client. This might lead to leasing arrangements, discounts, and other forms of “creative financing.” Kronenberg has also built managed services into nearly 30 percent of the business, uses e-payments to speed the receipt of funds, and constantly plugs operational data into software so he can make adjustments on-the-fly. “There is no single solution to managing cash flow,” he says. “It’s all about developing sound business practices and thinking creatively.”

SAMUEL GREENGARD specializes in business and technology writing. 

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