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Keep the Cash Flowing: Publisher Strategies for Financial Stability

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As economic problems surface, buyers start pulling in their financial belts an additional notch. They start resisting the urge to spend. And they begin to delay payments. For the small independent publisher, cash is king, but getting customers to let go of cash can be increasingly difficult when times get tough. Nevertheless, maintaining a continuous flow of cash is critical to the health of every small business.

How Cash Flow Affects Your Business

By “cash flow” I refer to income that remains after deducting wages, rent, and other expenses. It’s what you have left in cash after you write all those payment checks.
When there’s a slow down the in-flow of money for these necessities, your operations can grind to a crawl. Without cash, you cannot operate. You can’t pay salaries, purchase that next print run, or fund that new marketing plan. Yet if you can generate good cash flow, your company can thrive. Cash not only pays the bills, it is a strategic tool for growth.
When sales cycles stretch, available cash gets squeezed. Large sales can take months to book, constricting cash flow. Short, quickly-paid sales can provide cash flow spurts, but you need more of these sales to cover your expenses and to generate sufficient gross profit. Here are strategies and tactics to help you keep the cash spigot open as you deal with a chaotic business environment. They represent food for thought and a fatter checkbook.

Working toward Better Cash Flow

Target and sell to buyers who pay cash at the time of purchase. Think again your relationship with wholesalers and distributors. Every week review your active sales prospect file. Potential customers who have not accepted your business offers after more than 90 days should be considered cold prospects. Either put them on the back burner indefinitely, or delete their file completely. If they “hem” and “haw” on adopting and buying your books, they will likely lag when it comes time to pay. Find and focus on those “sweet” customers-those that provide the most profit at the least pain.
If you sell to mid-sized companies, recognize that they typically make purchases by committee. You must learn how to sell to this market. To avoid “two-stepping” by buyers who seem unwilling, or unable to make final purchase decisions, find out who signs the check for product purchases similar to yours. Then include this person in future discussions regarding the relationship. This can help shorten the contact-to-contract cycle time.
Write agreements or contracts in clear language and make them custom to the situation of the transaction. Promote and then maintain open communications between you and your customers. Do all you can to make it easy for them to buy your books. Just spell out clearly the terms and conditions for payment and acceptance of work.
Ensure that all of your staff understands their relationship to cash-flow management. Get your staff to stay focused on generating sales leads and keeping the sales pipeline filled. A constant stream of good book sales with everyone in your company supporting payables collection can directly affect cash flow. If you pay commissions or royalties, tie each actual payment to a paid sale, not a booked sale.
Another useful strategy is to write a sales plan that specifies the number of book sales leads to be generated each time period. Then focus on achieving these numbers regardless of how many sales are made or how lucrative each sale is. By getting your team to book a minimum number of sales each quarter, they are motivated to get many small, bread-and-butter purchases rather than spend time and energy on a “possible” big deal. Bread-and-butter book sales produce sustained cash flow. Don’t go broke fishing for the large book sale opportunity.

Getting Payment Faster

When you work up the contract, remember that you want as much cash as soon as possible. Bill customers for each invoice. And try for the shortest net payment.
If you can, ask for full payment upon delivery. Make it sound and appear as if this is standard business policy. If they balk, it’s time to consider and negotiate terms. When customers insist on credit terms, negotiate the smallest net terms possible. When you do accept terms, try to keep them short. Weekly or bi-weekly is short. If given the choice, ask for money up front. You’ll be pleased to discover that you often get what you ask for. Don’t ask, and you can’t get.
Our policy is to get prepayment on all single-copy buys and on each first buy from a company or individual (regardless of the quantity). This lets the customer generate a sales history with you. If you had a pleasant experience selling to them, then you can establish an account in their name for future work.
And invoice promptly. Find out the proper procedure for invoicing and payment. Then follow the procedure explicitly. If they want the invoice mailed while you ship books with a shipping form, do so. See if faxing the invoice to their accounting office as the books depart your facility can speed payment. Remember that if you specify net 30 days, many companies can take 40 days or longer to get you the check. Your billing procedures greatly affect when the cash comes in.

Monitoring the Accounts

Don’t wait to collect. On net 30 terms, call the customer on day 28 to alert them that they have an invoice from you due for payment in two days. This also alerts them that you are closely watching the account. It’s unfortunate that you must be such a nag, but slow payment by your vendors hurts only you. And slow payment is the name of the game in many vendor cash flow strategies. Delayed payment hurts your cash flow, but it helps theirs.
If a payment is late, call them immediately. The invoice may have been sent to the wrong person or department. A call can clarify the situation and correct inadvertent errors. It can also put your invoice at the top of their bill-paying stack. I remember one vendor that we chased who pointed out that we had inadvertently sent the invoice to the warehouse with the books. They held it there thinking that we had also sent the invoice to their accounting department. It took us almost 90 days to get payment on that 30-day invoice.
So, carefully watch the aging of your receivables. Develop a standard benchmark for the average number of days it takes vendors to pay. Measure each customer against this benchmark. Then try to shorten the payment cycle with clients who take longer to pay than the benchmark period. Study your accounts-receivable aging at least weekly. Then act quickly on laggards. Get payment when payment is due. Oh, and be accurate on your invoices.

Establishing Good Credit through Your Own Payables

From another perspective, manage your own payables carefully. Don’t abuse the credit extended to you. Pay your bills on time. Just don’t pay them early. Paying when payment is due produces a good credit history. You get no extra credit for paying early, but paying on time builds a positive picture of your company. Then, if a financial squeeze occurs, your vendors will be more likely to work with you through the difficult time.

Using Spreadsheets to Evaluate Cash Flow

Spreadsheets can help you forecast future cash flow. Sales produce most of your cash, but generally, most multiple book sales are on net terms. Therefore, monitor the percent of sales that are for cash with the percent of sales that will be paid within the next three months. You can make an easy sales projection worksheet by listing sales by month down one column and sales paid per month down the next twelve columns as shown in Figure 1.
<!IMG SRC=”figure1.gif” ALT=”FIGURE 1″>

Jan $12,000 $15,000 $3,000 $2,500 $3,000 $2,000              
Feb $15,000   $9,000 $5,000 $1,000
Mar $10,000     $4,000 $5,000 $500 $500            
Apr $18,000       $10,000 $5,000 $3,000            
May $22,000         $10,000 $5,000 $5,000 $2,000        
All $77,000 $12,000 $11,500 $19,000 $17,500 $1,500              


Figure 1. Forecasting Cash Flow

As shown above, sales through April, were $55,000 with at total of $44,000 having been paid by the end of April. This represents 80% cash flow overall. If payables exceed 80% of cash taken in, then you face a cash flow problem and need to get payments quicker or find short-term financing. The key is to monitor cash flowing in and compare this with cash being paid out.
Another form of the spreadsheet above is the Cash Flow Monitor. Here the first column contains labels for cash coming in and cash expensed out. Each following column is for a specific month. Thus the rows down the columns contain cash at the start of the month (on hand, in the bank, or in investments), and income generated, followed by all the expenses that occur. The net result is cash flow excess or cash flow deficit. By totaling the rows across the bottom, you can generate a cumulative cash flow and even calculate the percent of cash flow each month and on a running average.

Scrutinizing Your Books & Their Profit

As a final point, seriously evaluate your mix of book products. Isolate and identify those books that are profitable. Then list your titles in order of percent gross profit earned. The top gross profit books are the “best” books. So are your high volume books. These will be a major factor in future strategies. It’s also important to determine those titles that just don’t generate profit like they used to and should be culled from books that you sell. You’ll discover that some titles just don’t make sense selling any more. If they can’t be made more profitable, drop those books. Donate or sell them at deep discount. Move out the inventory to make room for the “best” books. Low profit and slow selling books should no longer fit in your profit strategy. Instead, put your marketing and sales efforts into promoting the most profitable books-total gross profit that is. The key is to focus on quick and sustainable cash inflow with maximum profit on each book sale.


Cash flow management can improve the financial health of your publishing company. It works. It gives you understanding, and it gives you control. It also gives you advance notice of potential problems in the near future. Adopt cash flow management as your personal business tool. You’ll like the bottom line result.

Robert Brenner is an author, publisher, speaker, and consultant on pricing strategy and tactics. He is also the Research Director at Brenner Information Group. He can be reached at 619/538-0093, fax 619/484-2599 or e-mail brenner@brennerbooks.com. His company’s Web site is www.brennerbooks.com


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