Those business owners with increasingly old accounts receivable probably don’t want to read about their customers paying too quickly, but even today it happens. It is how you manage any change that’s most important.

My first client as a part-time CFO was a boutique healthcare consulting firm. Generally they had an even, predictable cashflow. One of their hospital clients had many projects with my client all running simultaneously. Their monthly invoices in total I could count on to cover the monthly payroll. In the odd month when payment was late it wasn’t by more than a few days and my client had a line of credit that we would use. Then one month the hospital paid two weeks later than had been the norm and the same thing happened the following month.

The hospital had been so regular in their payment cycle I got curious and called down to the accounts payable department. I was referred to the controller who informed me that they determined they were paying my client too quickly given the volume of work. And while they slowed their payments to my client they were never late, just on the late end of 30 days.

Often I have clients where the bookkeeper pays all the bills outstanding each time checks are run. Admirable you might say but poor cash flow planning. It suggests a very short view that can have a disastrous result. What do you do if two weeks later you’re hit with a surprise repair and the contractor only accepts cash for new customers? Ultimately there may be enough cash but today you can’t always be sure. Every business experiences high and low cash points during the month and to manage effectively someone needs to do cashflow planning.