How to get more cash upfront
THE CHALLENGE: Grail Noble, founder and president of Toronto-based Yellow House Events, runs a 10-person event-management company, which brought in about $5-million in revenue in 2012. The company ran about100 events this year, which means a lot of costs, such as food and hotel space, must be paid for upfront. Clients, though, had typically been paying 60 to 90 days after an event, so Ms. Noble had to dip into her company’s coffers to cover them. How could Yellow House get clients to put more money upfront so as not to become a cash-flow casualty?
THE UPDATE: After a year and half, the company’s cash-flow concerns are mostly no more. As one Challenge expert suggested, Ms. Noble had to become stricter with clients, seeking payment of most of the charge before an event took place. She now has a new policy for all clients: She asks for 80 per cent upfront, before or on the day of the event, with the balance to be cleared 30 days after. If a client can’t deal with those terms, she’ll say so long. (So far, everyone’s agreed.) She’s also letting clients pay by credit card, which gets her needed money right away, while the client has some time until its credit-card payment is due. Finally, she’s asked vendors for better terms. For some, she now has a 60-day window, rather than the day of the event, to make payment; for those that want immediate payment, she’s also paying by credit card rather than cash to give her, too, a few weeks before having to cover payments. “I’m definitely less concerned about cash flow than I was,” she says. “We only paid $100 in interest all year.”
Brett Gundlock/The Globe and Mail