Presented by: Mark Ernst, President Ernst Enterprises, LLC. Ernst Enterprises, LLC All Rights Reserved 1 Ten Steps to Improving Cash Flow

STEP 1 Ernst Enterprises, LLC All Rights Reserved 2  Develop and follow an account receivable (“A/R”) policy. A good policy should:  Define who gets credit  When you cut credit off  When a delinquent account goes to collection  When you sue to collect  When you discount and settle for less  When you write-off a bad debt

Step 2 Ernst Enterprises, LLC All Rights Reserved 3  Know your customers payables policies and practices. This should include:  Does the customer want an approved P.O. before invoicing?  Are P.O. #’s required on invoices?  When are invoices payable, i.e., net 30?  Is there a cut of date for the next payables period? (I.e., invoices received after a specific date are paid in the next payables check run?)  Any other unique terms or conditions required by the P.O or contract?

Step 3 Ernst Enterprises, LLC All Rights Reserved 4  Establish a personal relationship with the customer’s account’s payable person.  Ideally have your receivables person go over and meet the customer’s payables person. If you can’t go, call and ask:  How they like to receive invoices  If they want any special information on the invoice  Who the payables person should call if there is a problem  The goal is to build rapport. If the customer’s payables persons sees your receivables person as a “friend” chances are you will get paid ahead of others.

Step 4 Ernst Enterprises, LLC All Rights Reserved 5  Know the terms of your contract or P.O. and follow them.  Know the terms especially with regard to quantity, quality, etc.  Who here would like to share some unique terms a customer required?

Step 5 Ernst Enterprises, LLC All Rights Reserved 6  When there is a dispute follow the terms of the contract or P.O.  Notices required  Method of notice  Timing of notices

Step 6 Ernst Enterprises, LLC All Rights Reserved 7  Confirm before issuing your invoice that the work has been finished and/or the product has been shipped and received by the customer and that the invoice is correct in describing the work that has been completed and/or the product that has been shipped.  Provide sufficient detail in the invoice referencing the contract or P.O.

Step 7 Ernst Enterprises, LLC All Rights Reserved 8  For best results contact the customer one day after you expect they have received the invoice.  Ask did they receive your invoice?  Was it correct?  Were there any problems with the services or products? If yes, schedule a time for repair or replacement. Follow up when finished.  If everything is ok, ask when a check will be mailed.  At a minimum make this call no later than the 20 th day after the invoice is sent to the customer and confirm the same points above about the product/service.  If the customer says the check has been mailed, if yes, ask for the check number for your file.

Step 8 Ernst Enterprises, LLC All Rights Reserved 9  Promptly call the customer if the check has not been received by the due date.  Ask why the invoice has not yet been paid  If there is a customer satisfaction issue address it promptly and try to secure part payment for the service or product that was satisfactory  Immediately schedule a repair or replacement of the unsatisfactory item  Ask if the customer would like to pay by credit card. (If you have the capacity to accept credit cards.)

Step 9 Ernst Enterprises, LLC All Rights Reserved 10  If the customer has no problem with the services or product and still has not paid then you should:  Send the customer a letter confirming payment is due for the service or product in accordance with the contract or P.O.  Confirm that you are suspending any further services or product shipments until payment has been received.  Tell the customer as of a specific date you will report the late payment to the credit reporting agencies and turn the matter over to collection.  Follow your policies and keep your commitments.

Step 10 Ernst Enterprises, LLC All Rights Reserved 11  Implement policies that assure prompt payment such as:  A 2% discount for full payment within 10 days of invoice. (Note no discount if payment received after the 10 th day.)  Payment by a credit card on file. Benefits the customer by simplifying payments, and they can get credit card rewards.  Auto payment from a bank account.

Self-Diagnostic Check List Ernst Enterprises, LLC All Rights Reserved 12  Do you have an A/R policy/practice?  Is the policy/practice current and followed?  Do you track your receivables DSO?  Are your employees trained and competent?  Has your A/R person met your customer’s A/P person?  Do your customers know your policies & payment practices?  Do you have a contract or PO for all work?  Do you require a deposit prior to starting work? (If you are purchasing major parts or supplies, consider a deposit that minimizes or eliminates your out-of-pocket purchase expense.)  Do you offer a discount for auto pay or net 10 payment?

Ernst Enterprises, LLC All rights reserved 13 Mark Ernst is the founder of Ernst Enterprises, LLC, whose mission is to help business owners: Achieve their Vision Our Core Values Confidentiality: We treat all client matters and discussions confidentially. Integrity: We operate with openness and transparency in all client matters. Trust: We earn our client’s trust by keeping our commitments. Expertise: We are or bring in the expertise our clients require.

Ernst Enterprises, LLC All rights reserved 14 Mark Ernst Bio Mark Ernst has been the trusted advisor to CEO's and senior business leaders for over 20 years. He has an extensive background in strategic planning, mergers and acquisitions, budget planning and analysis, process improvement, change management, talent acquisition, development and retention, succession planning, employee relations, compensation and benefits, safety and security, and facilities management. Mark’s career includes senior level positions at such prominent companies as Nabisco, PepsiCo, Long Beach Bank (now Ameriquest Mortgage), Freedom Communications, Autobytel, and Businessland. His industry experience includes: Internet marketing, food manufacturing and distribution, financial services, broadcast, and print media. Mark earned his J.D. from DePaul University and his BA and MS from Lewis University and is an Accredited Executive Associate of the Institute for Independent Business. He has completed specialized programs in Mergers & Acquisitions at UCLA; Managing Organizational Change at Stanford University; and The Business Development Program at the Kellogg School of Business, Northwestern University. He frequently speaks on a variety of important business topics such as: strategic planning; maximizing cash flow; preventing sexual harassment; planning succession and exit strategies; minimizing the risk of employment litigation; and other contemporary business topics. Mark resides in Lake Zurich, IL with his wife Nijole. They enjoy spending time together traveling abroad, boating, and motorcycle riding. References and further information can be found at: