By HANNAH SELIGSON
SMALL-BUSINESS owners know it is cash flow or die. While the recession officially ended in June 2009, many companies are still reeling. Credit can be hard to come by, and profits have not completely bounced back. On top of that, many customers are taking longer than ever to pay their bills.
Exhibit A is Cisco Systems, one of the largest technology companies in the world, which announced last year that it would wait a full 60 days to pay its small-business suppliers — mostly because it had found that that was what other big companies were doing.
So how does a small business get paid in a tough economy without hiring a collections agency or alienating its clients? Better yet, how does it avoid ending up with a stack of unpaid invoices in the first place?
Judging from the experiences of the small-business owners interviewed for this guide, it is part art and part science.
DO YOUR DUE DILIGENCE
It used to be that credit reports were expensive and only for big companies with large budgets. Not anymore.
Ron Phelps, commercial credit manager at Boulevard Tire Center, a tire distributor with 26 locations in Florida, pays $99 a month for Pulse, a service offered through Cortera, an online business credit reporting system, that keeps tabs on his clients. Last December, Cortera’s monitoring system noted that there was a large federal tax lien on one of Mr. Phelps’s clients, a small trucking company. He cut off the company’s credit line.
“That very same day,” he said, “we decided just to make them a cash customer, because we were concerned about their ability to pay.”
Cortera also offers a free service that collects and analyzes payment histories on more than 20 million businesses. Think of it as Yelp for business credit — instead of reviewing restaurants and stores, its community gives feedback on how promptly a company pays.
“We are helping small businesses tell the world that this person is a deadbeat,” said Alex Cote, vice president for marketing for Cortera.
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