• Manage your receivables. “See if you can turn your receivables quickly without antagonizing customers,” says Siegel. “Call them and tell them what you’re up against, and arrange more favorable terms.” Especially if you know your fees don’t put a big dent in the customer’s budget, Siegel recommends reminding them you’re not a big creditor. “Ask them, ‘What can we do to get me paid more quickly?’ If you can persuade customers to pay quicker you improve your receivable balance. This creates more money.”
• Establish terms up front. When Siegel’s firm picks a new client, he sends them an engagement letter that spells out payment terms, so there won’t be confusion later on. “Set the ground rules up front in terms of when payment is required, when a late fee will be assessed.”
• Analyze inventory positions and manage them down. Growth doesn’t always improve revenues. Siegel once had a client who manufactured overcoats. “He bought his orders in the spring, manufactured in the summer, shipped in the fall and collected at year end.” The manufacturer tripled his business in a year. Sounds good, right? Not necessarily. “In the spring and summer,” says Siegel, “he had to fund a lot of production and manage a lot of receivables. In such a case, you can grow yourself into bankruptcy.”
• Manage vendor relationships and stretch accounts payable when there won’t be adverse consequences. “There are some kinds of debt that are tough to manage, like bank loans,” says Siegel. If you don’t pay on time, or the ratios on your statements aren’t conforming to your projections, a small business can get itself into trouble. But there is also “trade debt,” which Siegel says is often easier to manage. Again, he says, it’s a matter of getting on the phone. “Call your suppliers and ask for a longer payable period. Tell them ‘we need to go from 30 days to 45.’”
• Re-examine your vendor relationships. Make sure the costs are right. “Say you are hiring a lawyer,” says Siegel. “Find one who wants to be in on the work you are doing. Find one who is willing to fix price it. They want the work, they want a hot new client, plus we’re in a recession.” He also advises going to professional service providers where there is not a sole source (such as electricity) and asking if they will cut prices. “Say ‘I want to work with you. Right now I have to squeeze you a little, but it won’t always be this way.’”

If you can manage your business in such a way that your income is ascending, Siegel says that may be an answer to your problem. But, he says, like the overcoat maker, “There could be an extended period of time where increasing income reduces cash flow because of money tied up in inventory and receivables.”