Are you your customers’ bank?

The thumbnail version:

  • Cash flow is a problem in these COVID-19 time
  • Some of your customers could be at risk of failure
  • Bad debts can kill your business
  • A cash-only policy could save your shop

The full version:

COVID-19 has had an impact on the way business is done. For instance, cash flow is a problem for many businesses, your customers included. Some established businesses have failed because they haven’t been able to collect the receivables on their books when the pandemic struck.

No credit. No receivables. No bad debts.

I once spoke to a shop owner who built his business on a cash-only basis; no credit, no receivables. Of course this disqualified him with some customers who required credit but his argument was that building a bigger business with a big receivables list is kidding yourself and and incurring unnecessary stress and risk; COVID-19 has proved his point.

No credit. No receivables. No bad debt.

if you want to reduce your exposure to risk by not serving as your customers’ bank, you could start with a notice that: “Due to the COVID-19 pandemic we require full payment upfront with all orders.” Then list the various ways you accept payment. Some customers may object and you’ll have to do some persuading. But if your survival is at risk . . .