Because cash is king

October 1, 2007 By    

The first hint of gold, red and orange in the autumn foliage should mean that propane marketers are anxiously focused on the critical heating season ahead.

Patrick Hyland
Patrick Hyland

Far too many, however, are still chasing receivables from customers who owe for LAST winter’s deliveries.

I can’t count the number of times a propane marketer has told me he is postponing a much-needed bobtail purchase or storage upgrade due to tight cash flow. It happens when cold weather generates larger-than-expected bills for customers. It happens when warm weather slows company sales.

Ultimately and always, cash is king in order for any business to thrive. No matter how many gallons you sell, how many customers you have, what you margins are or how efficiently you run your operations, your business is in trouble if cash flow gets choked when customers don’t pay as promised.

Propane marketers responding to our annual State of the Industry survey tell us that billing after delivery with standard terms for payment is by far the most-used method of invoicing in our industry. But every time you send an invoice for later payment, you are extending credit. Is your company in a position to serve as a bank?

Our industry is hardly alone in this dilemma. About 45 percent of small businesses cite slow payers as one of their most significant payment concerns, according to the National Federation of Independent Business.

Delinquent payments can be an especially acute crisis for small companies whose sources for solving cash-flow problems rarely extend beyond personal savings, a bank loan or a business line of credit.

Of course, cutting ties to slow-paying customers is almost never an easy call since our companies thrive on the commitment to customer relationships.

So before you complete all of your pre-season fills, consider these tips offered by marketers in our survey the last few years to help get timely payments for the product and service you are delivering:

  • Offer pre-payment incentives as well as volume discounts;
  • Require credit checks for all new customers and those with a history of being tardy;
  • Put a hold on new purchases for accounts past 60 days; and
  • Accept credit card payments – even though you justifiably hate to give up a cut of your collection.

Like all businesses, propane marketers must have quick access to capital in order to survive. Nothing else matters if you can’t pay your bills.

Patrick Hyland
Editor
phyland@questex.com

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