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Relationships matter! That’s easy to understand. Most of us are successful based on our relationships and because we value other people in our lives — both at work and at home. Relationships are deepened and trust developed when mutual expectations continue to be met over time. The depth and quality of relationships are tested when these mutual expectations aren’t met.

Case in point: It takes 90 days or more for a customer to pay you when you were counting on receiving your payment in 30 days. When this happens to be a very large customer that is a “slow pay,” an ugly chain of events can ensue. The effects can range from making it hard for you to meet payroll to delaying your commitments to your trade partners.

For those of you who are not being squeezed by the current economic downturn, God bless you! For the rest of you, here are some strategies to help your cash flow not just for the short term, but as sound practice when cash is not as tight.

FIRST AND FOREMOST, COMMUNICATE!

When expected payments are late from a customer, or you know you will be late paying your trade partners, it’s safe to assume somebody is going to be feeling some stress. Very few managers wake up in the morning all fired up about getting to work and resolving conflict. Even fewer accounts payable or accounts receivable people are champing at the bit to discuss late payments. Now is the time to leverage the relationship, not abuse it.

Call customers that are late and ask when you can realistically expect to receive payment. Depending on the circumstance and the amount of money involved, the person with the most influence in the relationship should make the call.

Don’t be bashful about being proactive: Call a customer before the payment is due. Sometimes this will queue up your payment before someone else’s, and you will have averted a slow pay.

Suppliers and vendors should be given the same courtesy you would like to be afforded in the case of late payment. Call them if you know you won’t be paying on time, and give them your best guess as to when they will be paid. Working through challenging situations can strengthen relationships if done with consideration. Not addressing the conflict or pretending it doesn’t exist isn’t helpful.

The following are some ideas that can help improve your cash flow strategy:

1. Rethink your payables procedures and hold onto cash longer

Take as long as possible without hurting your vendors, unless you’re offered a discount for prompt payment. Take full advantage of the agreed-upon terms, but don’t be late; you want to maintain excellent trade credit. If you see a tight cash situation on the horizon, call your trade partners in advance and ask for extended terms. Oftentimes they will grant them to you.

2. Track your accounts receivable

At the most basic level, know what payments are due and when. State your payment terms clearly on your invoices and consider assessing penalties for late payments. Don’t offer extended payment terms unless you are certain it provides enough incremental business to justify the cost of offering the terms. Extended terms can reduce profitability by tying up nonproductive cash.

3. Be savvy about inventory levels

Inventory consumes cash. Work with your vendors to create an inventory management plan in which they will give you only what you need when you need it. Not only does this maximize your cash position, it effectively increases your available square footage for manufacturing.

4. If you’ve accumulated excess inventory, liquidate it

Even if you don’t get as much as you would like, having some cash now is better than no cash later.

5. Know your best sources of cash

Focus more on business that brings in more cash. Take a hard look at your customer list. Now may be the time to fire unprofitable or marginal customers.

6. Stick to your budget

Outline when you expect money to come in and when you need money to go out. Don’t abandon the plan.