Key Stepsto ImprovingCash Collections

Hennessey

CAPITALGrowth Capital. Financial Wisdom.®

Financial Spectrum

Seed CapitalAngel Investment

early stage equity investment

Venture Capital

early/mid stage equity investment

Asset-Based Finance

early/mid stage debt facilities

SBA Lending

mid stage debt facilities

Equipment Finance

asset specific mid/later stage

financing

Conventional Bank Lending

later stage debt facilities

Start-Up Rapid Growth Maturity

Factoring

• Simple way to access cash tied up in A/R• Leverage up to 90% of invoice value• Use for specific invoices or specific customer• Can be used in conjunction with current bank

facility• Cost is based on percentage of sales• Combine with business resource services

- Credit, Collection and Treasury Management• Provides additional level of invoice management

Steps to Improve Cash Collections

The The Sale Sale

Before

During

After

Key Steps - Prior to the Sale

• Understand competition and value of your product

• Know your customer AND your customer’s customer

• Develop risk tolerance level

• Be prepared to say “NO!”

Collections in Action

Who is the end customer? • Selling to a municipality – understand the

processes and potential “red tape”• Auto supplier – understand the supply chain and

how industry trends or news may impact your payment cycle

Consider your risk level • $100k sale 20% profit margin- $20K contribution• $80k loss results in $400k of new sales at 20%

margin

• Ask around town

• Don’t be afraid to negotiate and be creative

• Set the rules of engagement– Structure – Pricing

• Be upfront and honest

Key Steps - During the Sale

Talk to your Customer

Don’t be afraid to ask • Down payment: historically received 20% down,

needed 40% due to bank restrictions• Company was rewarded, due to exceptional

customer service and valued relationship

Terms• “Cash in” needs to match “cash out”• Payment terms can be based on

progress/milestones accomplished on a project instead of payment upon completion

Key Steps - After the Sale

• Develop and follow your process

• Consistent internal and external communication

• Build a relationship with your customer

• Recognize and understand the red flags

• Know your leverage points

Collections in Action

Relationships• A/P may be willing to give you “behind the scenes”

insight, if a solid relationship has been built

Delayed payments - be cautious • Requests to pick up a check in person • Arriving unannounced • Ask for credit card payment

Leverage• Tooling supplier - hold up shipments, lien filings• Staffing - stop sending people

Credit Resources

• Dun & Bradstreet – provides commercial information on businesses.

• Moody’s – provides credit ratings, risk analysis and research

• Hoover’s Inc.– provides information primarily on publicly held companies

• Bernard Sands – provides information on companies in the retail industry

• Ansonia Credit Data – Co-op for credit information, members provide their credit history to be shared

Credit Resources

• TransCredit – provides information on the transportation industry

• Experian – known for personal credit reports but also provides information for businesses

• Yahoo Finance – business news and credit information, primarily on publicly held companies

• Business Capital Risk Control Services – provides background information on businesses and individuals

Questions?

Thank YouMike Semanco

President & COO

Hennessey Capital

MSemanco@HennesseyCap.com

248.658.3201

Candace Pavliscak

Senior Vice President

Hennessey Capital

CPavliscak@HennesseyCap.com

248.658.3204

Learn more and contribute at: HennesseyCap.com/CapitalConversations.