Using Cash Flow To Survive During Recessionary Times
Using Cash Flow To Survive During Recessionary Times
Federal, State and Local governments could learn from small business entrepreneurs how to survive when cash is not coming in as it has in the past, or not coming in as quickly. Our governments are having to deal with less cash to maintain services, yet continue the services, without laying off employees. Unemployment is traditionally a measurement of private industry, not government employees and their jobs.
When cash coming in slows down, or please forbid, stops, then change has to happen. Private industry has to adapt or die. Many small businesses who create the jobs and maintain them adjust based upon dollars coming to the business to pay for wages and products. During the tough times the adjustment made by entrepreneurs is to watch the amounts of cash needed to exist to a new day, new week, new month or new year. Profit becomes secondary as cash dictates survival.
There are certain obligations that must be met or the business is closed by the creditor's demands. The strongest creditor is government for the small business.
Regulatory bodies such as the IRS, property tax entities, state sales tax collectors, have remedies denied to the very businesses that create the revenue streams for attachment or garnishing.
Operating in North Carolina, Wake County, we experience some of the most severe regulated conditions imposed on private enterprise by legislatively created regulatory agencies. The most powerful is the ability to freeze bank accounts and remove all money from any account connected to the business or the owner for payment of property taxes. In Wake county if a property owner fails to pay property taxes the taxing authority has the right to confiscate money whether there has been any judicial act or proof the amount owed is really owed. The taxing authority simply sends a bill for property taxes, expects payment, and if not paid in regulatory body imposed time frame, seizes the bank account, freezing it for 30 days first. If the bank fails to comply the bank is held accountable. The small business owner wishes he/she could do similar when one fails to pay bills due. Due process occurs except for government when money is needed.
The small business owner has to minimize cash disbursements knowing if they fail to pay any govt. fees such as taxes, utilities, or special assesments for licenses etc. then the business will be closed. The cash is apportioned to those with the most powers, generally always some form of government entity. Those with the least power get less money or none at al, which often results in that business/manufacturer closing down.
As an example the small business owner may owe $1,000 for goods purchased for resale. The vendor purchased the goods with terms that required payment 30 days from receipt of the order, n/30. 30 days later the goods are still sitting on the shelf, unsold, yet the invoice is due. The supplier has little recourse other than refusing to sell new goods to the business unless paid for in cash, or credit card prior to shipping. This hampers the business owner and most manufacturers realize the issues in trying to move new product and adjust to the changing economic climate.
In today's climate it's not unusual for manufacturers to "delay bill". A delayed billing is something along the lines of sending the product to the business but not sending an invoice to the business until 60 days after receipt of the goods.
Another example is only requiring 25% paid each month so the cash flow from selling the goods closely matches the cash demands with revenue. Many vendors will give "rebates" of goods when the business pays the bills on time or orders larger quantities. For every 2 items paid for, the manufacturer will ship one item free. The selling of the "free" item increases cash on hand so the business can pay the manufacturer. This is the type activities seen in the private sector when cash flow has to be maintained.
Government does not have to work within the limitations that small businesses and manufacturers do. If government is not paid then seizure is a remedy, not working with the business or entity to help them survive and continue to employ and contribute to tax revenues.
The remedy to helping our economy is to make government work within the same rules that private industry has to work under. No special considerations given because one creditor can create rules solely for itself simply "because it can". This is what government can and does do. In many situations it results in closing business down, eliminating jobs, reducing revenues and increasing taxes for those able to survive.
Government needs to work with private industry to sustain our economy, not refuse to acknowledge reality at the expense of the private sector. Cash flow is vital as many government entities are begining to discover when job losses are possible as a remedy.
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