Cash Flow Problem? I Don’t Think So

I have heard many times from business owners that they would have a great operation if they could just solve their “cash flow problems.” Then, when you take a closer look, the problem is really a lack of profitability. They tend to not see the forest for the trees. Even during periods of rapid growth, if a printing business is run profitability, cash flow problems should not be an issue.

If a company is operating with good margins, staffed properly and managing accounts receivable, cash will flow. Even if a company is operating efficiently and is nicely profitable, if receivables do not turn, it will get into trouble. Similarly, if the company is not profitable, even turning receivables in 30 days will also spell trouble. This sounds like simple business sense, but often times, owners will go into denial regarding where the true problems exist.

If a company does not have sound credit/accounts-receivable policies and enforcement, it can spell disaster—even if the business is highly profitable. If a customer will not agree to pay invoices (not monthly statements) within 30-day terms, it should be your policy not do business with them. Moreover, any account that regularly goes over 60 days in accounts receivable should be put on COD with a firm plan to reduce the past due balance.

Does this sound like too harsh of a policy? Last year, I wrote about how to deal with accounts-receivable/credit issues in a blog (“Bad Customers Always Find a Home”).

If you think this is too harsh a policy, I suggest you rethink how you want to do business. In these times, one cannot afford to do business with “unprofitable” or “at risk” customers. Slow-pay customers are often at risk, and most often become unprofitable. There can always be exceptions, but they should be made cautiously and only by top management to ensure any account with more liberal terms are agreed to and will result in a profitable client.

Carl Gerhardt is the chairman of Alliance Franchise Brands LLC, the parent company of Allegra Network LLC and Sign & Graphics Operations LCC, and a world leader in marketing, visual and graphics communications, linking more than 600 locations in the United States, Canada and United Kingdom. The company’s Marketing & Print Division, headquartered in Plymouth, MI, is comprised of Allegra, American Speedy Printing, Insty-Prints, Speedy Printing and Zippy Print brands of marketing, printing, mailing and Web services providers. Its Sign & Graphics Division, headquartered in Columbia, MD, is comprised of Image360, Signs By Tomorrow and Signs Now brands of sign and graphics communications providers.

Carl and his wife, Judy, owned and operated their own successful Allegra franchise for nearly 20 years before selling the $2.3 million operation in 2003. He is a PrintImage International/NAQP Honorary Lifetime Member and was inducted into NAPL’s prestigious Soderstrom Society in 2010 in recognition of his contribution to the industry.

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  • Warren Seidel

    What a refreshing article to read. It is hard to swallow the simple truth, but firms who sell their product at cost or lower to "keep things running", also hurt those firms with solid business models and cash flows. Shame on distributors who ignore the obvious signs and allow extended terms to these same firms to "keep things running".