Getting your Creditors to Fund You!

To keep a positive cash flow you need to record your debtor and creditor weeks. Once you know these you can see where your business is going and understand why and when you will need money. The dream position for your business is to get paid before you pay your creditors.

Amazon do this.  Through my publishing company we have a shop on Amazon, we love them because they pay us within 7 days, with our other distributors we have to chase them to be paid monthly.

But, Amazon can do this as they have been paid, they are using customer’s money, while most book distributors, who sell to the local book shops, have to wait for their customers to pay them. This means that Amazon have to be our favourite distributor as they pay us so quickly.

So how do we set the weeks?

Debtor Weeks

Take your last 12 months sales and dividing them by 52 giving you a weekly sales figure, let's call this figure "x".

Now take outstanding debt today and divide them by the "x" figure, this giving you your debtor weeks.

Creditor Weeks

Now do the exact same exercise with your creditors.

In two weeks’ time do the same exercise, create a new “x” figure and then divide it into both the Debtor and Creditor figure.

Get into the habit of doing this every other week.

Your target is for the debtor weeks to be less than the creditor ones.

Once you achieve this your creditors are financing your business.