At a party over the weekend I caught up with a niece I hadn’t seen for some time. Her husband owns a remanufacturing company that works only on very large compressors used in hotel, retail, office building air conditioning systems.
She was very grateful for the scorching humid summer because the economy has dictated that equipment is repaired rather than replaced. I spent most of my working life in refrigeration so I understood completely.
What shocked me was her husband’s business had $60,000 in receivables.
Companies still have receivables?! I asked her. When was the last time air conditioning contractors didn’t get payment immediately after the service? Weren’t his customers responsible for keeping malls, hospitals and hotels cool? Didn’t they get paid right away?
Her husband’s reasoning? If we don’t use invoicing and terms customers will go down the street to someone else.
He has trained his customers to use him as their bank. Who needs a line of credit or adequate cash flow?
I suggested it might be better to let the people down the street hold the debt. Let them have all the cash flow problems. Talking to the choir my niece said.
Do you have receivables? How do you handle customers who want extended terms or threaten to use someone else? Have you made a recent change to pay in advance or payment upon delivery? Interested in hearing your story!