How do I create a monthly budget for my website network when I have companies paying me net 30-90 days? How can I plan?
My company is currently making a return of a roughly $1,000 per day when I invest all my money back into traffic. We are operating at at about 330% ROI. The downside is that I am not getting paid for that $1,000 per day for months. I have anxiety attacks when the business says it only has $10k in the savings but I know that I have over $40,000 incoming.
How do I get over this hump?
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May 10, 2014
Not sure why you are waiting 30 - 90 days for payment.
If people are paying late - implement penalties for late payments - max allowed in your state
If this is the length of the project, break up the payments 50% up front, 25% at the halfway mark and final 25% upon completion
May 10, 2014
Offer your clients a discount for paying early. Figure out what it is costing your to carry them and them offer them half of that savings to start as a discount for paying early.
Why are you offering such generous credit terms? Thirty days should be your max. Microsoft takes a 2% discount for "paying" in 10 days.
Feb 8, 2014
You may want to look into Accounts Receivable financing also know as Factoring. This is how it works. When you provide goods or services to your clients/customers you immediately send them an invoice. Then, instead of waiting 30 - 60 - 90 - 120 days to get paid, you can sell your invoices to an Accounts Receivable Company ("Factor"). The Factor will in turn do its due diligence to ensure that your client is financially sound. Once your client passes the Factor's due diligence process, the Factor will pay you up to 80% of the face value of the invoice within 24 to 48 hours of submission. The remaining 20%, less a small factoring fee, will be paid to you as soon as your client pays the invoice in full.
Please note also that the factoring fee is a business expense and is therefore tax deductible. I am not a tax practitioner so please do verify this with your Tax Advisor.
This is one of my absolute favorite, low cost tools for keeping the working capital flowing.
Hope that helps.
Best regards.
Feb 6, 2014
I'm sorry to be blunt but the problem is you've allowed this to happen. Be firm at the beginning of a relationship and you establish the rules. I run a small business and the moment an invoice goes unpaid for more than a few day I start to nag. I keep doing this in the form of statements, phone calls and emails. I'm not nasty or impolite. I want to keep my customer but I also expected to to paid. If you allow this to happen then your customers will take advantage of you. Get them to pay you on time and they can sort their own cash flow out by paying their other suppliers late.
Feb 5, 2014
How old is your company/business? You actually are talking about two different subjects, one being sales and the other being cash flow. If your company is old enough then you need to use historical data to help you create your budget. If you are tracking properly you can take annual revenues, break them down into monthly revenues and assign percentages on a monthly basis. You can then use the historical percentages to move forward with future budgeting. This is a simplified version as there are other factors to consider when creating budgets.
Feb 5, 2014
Have you considered giving a discount for "quick" payment? The traditional formula is, '2/10 Net 30.' (2% discount in ten days or net in 30.) Another option might be to have a rotating, 'line of credit' bank loan to 'even out' your cash flow. {From a cost v. benefit perspective, compare your cost to borrow against a discount rate you are willing to live with.)
Feb 5, 2014
1) Do not pay loan interest and/or fees to manage your cash flow. This is the corporate equivalent of "payday loans" which will bleed good money out of your annual capital, stifling growth and potentially robbing you of the money you need to fix this. Not to mention foster a very expensive dependency...
2) You should set payment terms your comfortable with - HOWEVER you've already set an expectation with your clients. Changing terms on them will at best be annoying, and at worst turn them towards your competitors.
2.1) How did you come to decide on NET30 and NET90 terms to begin with? Why wasn't cash flow considered when you first set terms?
NOTE: It's really hard to advise you on a strategy without knowing a lot more about your business. There are a million ways you can resolve this issue. They are all different, they all require different starting points, and assume different vantage points. Bottom line: this thread will open your eyes to options, but it sounds to me like you need to consult with someone. Obviously I'd love to help, but if not me, pick someone who will get personal with your business - b/c that's what you need right now.
IN GENERAL: without knowing specifics I can't be specific, but i can tell you the general strategy is to taper off spending and rejig the entire sales process. That could mean a few tweaks your customers don't even notice, or it could mean a complete pipeline overhaul. Only an experienced strategist will be able to draw you a safe road map.
REST ASSURED: this can be done. I'm just not sure it can be done in this thread. Feel free to shoot me a message.
Feb 5, 2014
I don't think you asking about budget as much as cash flow. Budget is fixed sales and expenses and doesn't have anything to do with cash flow. You should have or borrow enough money to cover your receivables so you have the cash you need. If that is not possible or desired, then change your terms to net 30 or incent people to pay more quickly.
Feb 5, 2014
HU, open a excel spared sheet first coulomb date, detail, amount+(credit), amount- (debit),if you have some accounts put account , balance ( previous balance + credit - debit ) it will look like (row 3) Cell -> G3 -->G2+C3-D3.
copy this formula to all row + dates and you can have your balance ant any point of time while entering data.
if you have peeks try to postpone expenses or get a temporary overdraft .
Feb 5, 2014
If your the information supplier, you control what is sent out. I have been involved with distributors and retailors. If your waiting to be paid by your customers, cut them off after a certain time frame - net 15. When their supply chain gets interrupted, they will see the light. If your being paid through the supply chain that might be a bigger battle but the same way still applies. If their time frame to pay is shorter, you have a better way to plan expenses.
Instead of a discount for paying early, implement a penalty for late payment