It’s a meltdown out there. Financial institutions are crumbling, the government is stumbling and your customers are about as bearish as a grizzly the day before it hibernates. When your retail customers’ sales are down, it means yours will be too—along with higher returns and slower payments.
So how can you protect yourself? How can you hedge (do we dare use that term anymore?) your cash position and get payments more quickly? Here are 15 tips you can implement tomorrow to help you through this slough of despond.
1. Remember, above all, that your company is not a bank (and, today, that’s a good thing). You can’t afford to be a bank, you’re not set up to be a bank, you don’t want to be a bank—so don’t let your customers treat you like a bank. Your responsibility is to collect your money as fast as possible.
2. Budget more realistically. Cut your sales projections by 15 percent and print shorter runs. You’ll maintain less inventory and tie up less cash in the first place.
3. Use print-on-demand (POD) where possible. Save cash by printing only what you need.
4. For books where POD doesn’t make sense, don’t reprint too quickly. For most books, a short out-of-stock condition won’t be overly detrimental. Better to accumulate back orders for a bit than to print too many. The most expensive printing is the last printing.
5. Be doubly stringent on your credit limits. Who would have thought AIG would go under? Merrill Lynch? Not many. Well, the same can happen to distributors, bookstores and large wholesalers. Don’t be intimidated by the big guys. Set limits for them as well and adhere to those limits. Put any account over 120 days on a firm hold until they pay. Don’t assume stability; plan for instability.
6. Age all accounts monthly and carefully monitor payment trends per account. If a customer’s balance is growing or it is not paying in the pattern it normally does, it’s a clear sign that the customer is weakening and having trouble. Call these accounts immediately and, if necessary, place them on hold. It’s true: The squeaky wheel gets paid first.
7. Review your contract terms and change them. Everyone thinks contracts are cut in stone, but they are not and don’t have to be. Reduce royalty rates; reduce advances; extend the payment dates of advances—you get the idea. You can’t afford to be generous in this economy, so don’t be. Remember, cash paid out to others is cash not available to you.
8. Seek to cut costs throughout the organization. Cut development costs, cut cost of goods, reduce marketing and sales costs, reduce overhead (if Wiley can move from New York to Hoboken, you can cut your rent or renegotiate your lease). Be careful about cutting salaries though. Good employees are hard to find, and that can actually cost you money in the long run.
9. Extend your own payables. Just be consistent in paying them. If you pay in 30 days, go to 45, but pay consistently in 45.
10. Borrow carefully—if you can! Shop around, and don’t panic. Get a reasonable rate for a reasonable term. Better not to get a loan than to default on one.
11. Think strategically. Understand what your trouble points are and how you can avoid them in the first place. Plan more and adhere to that plan decisively.
12. Change your strategic plan to a step strategy. You don’t have to constantly grow. Give yourself time to catch up and collect your receivables. Go from constant growth to growth-plateau-growth.
13. Focus on higher margins: Emphasize the sale of higher-margin products to higher-margin sales channels. Focus on lower-discount channels and nonreturnable sales.
14. Raise prices strategically. While you may think raising prices in times of economic turmoil is counterproductive, there are always excellent backlist titles for which demand will be constant, even if you raise prices slightly. Take advantage of these cash cows and milk them a bit.
15. Talk to your customers and creditors, and keep the lines of communication open. The more aware you are of your customers’ situations, and the more they know about yours, the better for everyone. The more you know, the earlier and the more appropriately you can respond.
Thomas Woll is a columnist for Book Business. He is president of Cross River Publishing Consultants Inc., Katonah, N.Y.
(PubConsultants.com).