The Issue: Cash is king and there may not be enough of it coming in from customers to fund your operations at normal levels.
The Bottom Line: A good receivables process and proactively understanding your customers’ ability to pay you are critical to keeping receivables current and understanding your company’s on-going cash flow expectations.
For more, read on.
First, the good news: most landscape/maintenance operations were considered ‘essential’ and able to continue working through the COVID-19 shutdown. That is great news for those organizations and their employees who were able to continue providing services for their customers and keep bringing home a paycheck to their families when so many others were sidelined.
Now the bad news: the customers that you rely on to pay you on time so that you can continue paying your employees and vendors timely may be hurting for cash. HOAs are finding their monthly fees dwindling as an increasing number of their homeowners have been affected and are strapped for cash. Your residential homeowners may be out of work and behind on bills. Businesses that your company provided services to through the shutdown may have been shuttered themselves, and many either could not take advantage of, or were not eligible for, the government’s paycheck protection program. Finally, your suppliers may be finding that they need to accelerate their terms on collecting for the products and services they have supplied to your business in order to keep their own cash flow moving.
What to do? While receivables may not be an owner’s first love or focus, cash is the company’s lifeblood. Without it, employees and vendors cannot be paid. If your company finds itself in a situation where a good receivables process does not exist or following up on past-due receivables is traditionally something that happens only with certain customers or when cash gets tight, now is the time to correct that. Get ahead of the curve. Call key customers and ask them how they have been impacted by current events. Find out what their needs are and whether their ability to pay has been compromised, affecting your own expectations of cash flow. Work with them, consider negotiating partial payments or installments, but, most importantly, talk openly and honestly about the issues and come to an agreement that will strengthen and preserve the relationship long-term. For those customers that were habitually slow paying prior to this crisis or have multiple months of outstanding invoices, the above is also applicable, but stopping or severely scaling back services until they are current may also be discussions to consider having. This tact generally works better with commercial properties since they must be maintained and cannot risk suspension of services. While turning difficult customers over for collection may ultimately be necessary, the human touch many times works wonders to break the ice and bring difficult topics, like past-due receivables, into the light, allowing you to further strengthen the relationships you have with your customers.
Steele Dynamic Services is a green industry consultant focused on the internal business operations of our clients. If you need help with your accounts receivable processes, or just about anything else, visit our website at SteeleDynamicServices.com to see our full line of services and to contact us to find out how we can help you create the future you want!
