Page 88 - Benjamin Franklin\'s The Way to Wealth: A 52 brilliant ideas interpretation - PDFDrive.com

business, may do thee more harm than good.’

Of course any bargain is only a bargain if it is a price cut on an item you
needed to buy anyway. A bargain that leads you into buying goods or
services you were otherwise happy without isn’t a bargain at all—it’s a loss,
and any theoretical saving is not only a waste of money but, more crucially,
a waste of cash.

With a credit crunch already biting and a potential recession in the offing, a
bargain ceases to be a bargain if it damages your cash flow. To genuinely
evaluate a bargain for your business you can’t just take into account the
price; you must also consider the terms of payment. Hard as it may be to
turn down, any bargain that puts a strain on cash reserves is probably not a
saving you can afford. Maintaining positive cash flow can be more
important than generating profit or scoring that ‘bargain’, since a lack of
ready cash brings with it the risk of failing to meet liabilities—with the
likely result of insolvency. If that happens, the receiver will investigate your
behaviour and if it turns out that you failed to meet payments to creditors
due to a hoped-for long-term saving, that bargain could cost you dear.

The flip side of this is that you can make your own offerings into a
‘bargain’ that encourages positive cash flow. Whether you deal in products
or services, you can improve your cash flow by giving discounts in return
for prompt payment or insisting on deposits in advance for jobs that you
are taking on.

HERE’S AN IDEA FOR YOU…
Tempted by a bargain? Don’t pay for it now. Instead make sure you’re
making the most of payment terms. If payment can be agreed on in,
say, thirty days, don’t pay before then and make sure you use a prompt
payment system, such as electronic transfer, to ensure you pay on time.