Is cash flow management a problem? perhaps accepting prepayments could be an option

Is cash flow management a problem for your small business?  Having enough cash to pay suppliers when due is a common issue, especially in times of

a cash flow management a problem

growth when you could be building up inventories. In her article No substitute for cash in the till, Dianne Buckner shares one company’s success with accepting prepayments as part of their business model and strategy for cash flow management. A problem no more for MacMarr, here’s what they have achieved.

 Is cash flow management a problem? perhaps accepting prepayments could be an option

“Guitars are the whole basis of our business,” says Marr. “We can’t have a day when a bill is due from one of our suppliers and say, ‘Sorry, I don’t have the money.’ No guitars means no sales — and that would mean no company, real fast.”

But after a customer offered to pre-pay for his guitar purchase, even though the delivery was months away, Marr found himself thinking “I hope there’s a lot more customers out there who think like that.”

He and MacKenzie promptly put a notice on their website, promoting pre-payment in exchange for free delivery. Normally customers pay $35 for delivery anywhere in Canada. The response to the new offer was so positive, that Marr now estimates 25 per cent of their clientele pay up front. The strategy turned MacKenzie and Marr’s cash-flow problem into a solution.

“I don’t want to give you the exact figures, but pre-payment for the last order of our Ian Tyson guitars more than paid for the order. We didn’t have to dip into our cash reserves at all. The order was pretty much 100 per cent funded by customers.”  view the source of this post here

 

Many companies in my part of the world require a small deposit when buying in goods for customers. As part of their normal business practice they will attempt to source an item  so not to lose a sale. It’s great customer service and financially sound, however I have not heard of  prepayments on such a wide scale. This outside of the box strategy is working for MacMarr.com, so how about your business? Is cash flow management a problem? Could accepting prepayments could be an option?

Or, have you another cash flow management idea?, I would love to hear from you.