How to successfully use a business line of credit

Money tug of warIt seems to me that no manufacturing business can really survive without a credit line of some kind.  It’s a simple fact that if you are producing a product, you must pay for the materials to make that product long before you will be paid for the final product unless you can manage collecting payment in full when you receive the purchase order from your customer.

Most of your customers will ask for and deserve payment terms of some kind.  These payment terms usually state something like “Net 30 Days”.  This means that the customer promises to pay for the goods invoiced in 30 days from the date of the invoice.

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Don’t Start Celebrating Until the Check Clears! (Part four) Other ways of getting payment

Credit cardI have been discussing getting paid via check but there are other more secure ways of getting paid. The drawback, however, is that these all require that you pay fees of some sort – except for a United States Postal Service (USPS) Money Order.  [This method is perfect so long as the USPS has money in the bank.  (This viable condition may be short lived if Congress has its way.)]  Your customer may find it a pain in the neck to get the Money Order because he has to stand in line at the post office, so most will likely balk at this idea.  What may appeal to your customer is that he can use his credit card to get a USPS money order.

Another method is for you to accept payment via credit card.  I have been asked to do this several times over the years but I have chosen not to do it. There are a lot of considerations when setting up credit card processing. Two issues to be aware of are the processing fees assessed by your bank and how/when the transaction is authorized (guaranteed) by your bank prior to shipping product.

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Don’t Start Celebrating Until the Check Clears! (Part three) What if the check bounces?

What do you do if your customer’s check bounces (that is to say, is returned for “not sufficient funds” (NSF))?

Well, the first thing to do is hope is that Jane’s telephone has not been disconnected! (This Checkhappened to me once and really ruined my day.)

Even if the phone is still connected, you should immediately be suspicious of this company.  In my opinion, there are no good reasons for bouncing a check – especially if you’re in business.

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Don’t start celebrating until the check clears! (Part two) How long do I have to wait?

Just because you have received your customer’s check, it does not mean your troubles are over. The title of this blog says it all: Don’t start celebrating until the check clears!

NSF checkIn case you don’t know, there is a period of time after you deposit a check in which the bank makes certain that the funds are actually available to be deducted from your customer’s account.

Back in the Stone Age when I was starting out, this used to take 7-10 days.  If there are not sufficient funds (NSF) in your customer’s account, the check will not “clear” and will be returned to you.  The amount of this check that you thought was deposited into your account will not be there.

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Don’t start celebrating until the check clears! (Part one) A guide to effective collections.

The Check is in the mailWe assume that as a solopreneur you plan to make money. And in order to make money you must get paid by your customers in a reliable and timely fashion.

Do not, I repeat, do not underestimate the importance and difficulty of the collections process.

You need to have a collections system to insure that you get paid because  most customers do not automatically pay their debts on time.  Some will string you out intentionally to help their own cash flow and use your money for financing their business.  Customers who do pay their debts on time without any prompting from you are as scarce as hen’s teeth and are to be treasured.

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