Good sales, but no cash: cash flow and collections

You closed the month with good sales, but on Friday there isn’t enough for payroll. It’s not that you sell too little: the problem is almost always the time between what you pay out and what gets paid to you.

The gap between paying and getting paid

You pay for materials and your people today. The client pays you in 30, 45 or 60 days, sometimes longer. Meanwhile, you finance the job with your own money. That’s why a growing business can run out of cash right when things are going best: more jobs mean more money paid up front.

Review what you’re owed by age

Sort your outstanding invoices by how many days they’ve gone unpaid:

• 0 to 30 days: normal; a reminder before the due date is enough.
• 31 to 60 days: a clear email with the invoice attached and the payment date you expect.
• 61 to 90 days: a direct phone call, not just an email.
• Over 90 days: check whether there’s a problem with the work or the paperwork, and decide whether you keep taking jobs from that client.

Invoice the same day

Every day you wait to send the invoice gets added to the end of your wait, because the client’s terms start counting when they receive it. A good invoice includes the job or load number, the dates, what was done and the payment terms. Anything unclear, the client will ask about, and every question delays payment.

Deposits and progress payments

On long jobs, agreeing on payments by stage from the quote reduces the money you pay up front. It isn’t always possible, but it’s worth proposing before you start, not halfway through the job.

Look at the next few weeks, not just last month

A simple week-by-week table with what you expect to collect and what you have to pay (payroll, materials, rent, truck payments) shows you the gap before it arrives. That way you decide in time: collect sooner, move a purchase or talk to a supplier.

In short

1. Invoice the same day.
2. Follow up on what you’re owed based on its age.
3. Plan the next few weeks of payments with what you actually expect to collect.

If today you don’t know how much you’re owed or since when, that’s the first step. In the free consultation we review your collections and tell you where to start.

The examples in this article are illustrative and are not a substitute for advice from your CPA.

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