I currently subscribe to various woodworking trade publications geared both large and small shops. An article that caught me eye recently came from Wood Digest. Although this is a publication geared toward extremely large shops I think the basic principles apply much the same way to our one man shows. One principle in particular is cash flow.
Stated simply cash flow is the amount of cash received and paid by a business within defined period of time. So you say how does this affect me? Well something I learned early was I couldn’t live on big projects alone. Sure a $5,000 conference table is a great commission but if I can’t turn it around and get paid it really does my business no good.
With that in mind I thought I would touch on a couple ideas within the article and from personal experience.
Take the small jobs - Like I mentioned earlier large commissions are great but don’t let all the small jobs get away. A quick furniture repair job or refinish project can put a quick couple of bucks in your pocket and those couple of bucks may pay the phone bill or buy a new saw blade:) Here’s a chance to get paid once a week and once a month.
30/30/30/10 - Try a different pay schedule? Rather than the old 50% up front and remainder on completion look for 30% upfront, 30% as a progress payment and 30% due upon completion. What about the other 10% you ask? Well require that 30 days upon completion. This will allow you the opportunity to touch base with your client and make sure they are as happy then as they where upon delivery.
Offer discounts to get paid quickly - Now who won’t take that 10% discount for early payment? Think of it this way, you get paid now VS a month from now and hopefully there may be some interest you won’t have to pay!
Use other people’s money - Know your suppliers billing cycle. Can you put off purchasing 10 sheets of plywood today if tomorrow the new billing cycle starts and you get an additional 45 days to pay?
RJ