I have a client, that won't be named, as it wouldn't be right to say who, that had been struggling for about 18 months with keeping his business running. It's not that they didn't get enough business, in fact they had loads of business and he he was struggling to understand why, at the end of each month things were looking so bleak.

It's not what I normally do, get involved in finance, but a lot of people, not all, who are doing well, seem to forget that they're actually involved in a business and that as a business, they've got to act in a way that maybe they don't like. He asked so I helped, as best I could; it turns out it wasn't such a difficult thing to fix.

This particular client was very focused on paying his suppliers at the end of each week - even if he hadn't been paid by his clients and I told him it was wrong.

It was even worse when you looked at when he was getting paid. His terms were 30 days from the date of invoice but on average he was getting paid on 52 days. I suggested he simply pay his suppliers on an average of when he was getting paid as a first step, but then thought better of it. Rather than look for a temporary fix, lets try and fix this properly.

We changed his terms to 14 days from date of invoice and included a follow up email after seven days to remind that payment was due. An email was then sent on 14 days if payment wasn't received asking for a payment date.

After that, we then spoke to his twenty biggest suppliers (he has about 80 but 80% of all his business went to the 20 - funny how the 80/20 rule applied here) and spoke about payment terms and how they were getting paid currently. We asked when they were getting paid and when we averaged it out over the 20 suppliers it turned out that they were getting paid on 51 days from date of invoice and some of them even had 7 day terms!

So, we came to an agreement that we would shave 10 days off that date and as long as we agreed to pay the invoice by day 41 - they were all happy for us to do this. The sales departments helped as most of the sales people didn't want to lose the commissions.

The important thing in agreeing this was to get the sales contact at each supplier to buy into it and when we presented our proposal - they were more than happy, as he had a position that worked for them and they kept the commissions.

So, what actually happened? Well, my client now has an average payment date of 19 days and he's paying out on all his invoice on day 40. This means, he has the cash in his bank account for 21 days before it is getting paid out to his suppliers. We started this about a year ago and not only has he got more cash to expand the business now, much quicker than he ever thought possible, his overdraft is gone and the Christmas party for the 22 staff is in New York this year.

What I'd like to know is, where the hell is my invite?

The point of this post is, while business might be dropping off for most of us, it's actually vital to get a grip on the business you have - then the rest will fall eventually into place - simply with the improved cashflow.