Cash flow is that the lifeblood of each business. The daily pressure of doing business is difficult however should be crammed with energy and quality. A income crisis is negative pressure and damaging and can eat away at your quality, retardation you down within the productivity department. Build a commitment to free yourself currently from cash worries and find your money flowing once more therefore you’ll produce the business you’ve dreamed about.
Getting customers to pay on time is one of the biggest challenges for business owners and when the problem persists too long, it can ultimately shut down your business.
For any business, the amount of money flowing in or out is critical to its success. When money is tight, paying basic bills can get tough. But when cash is plentiful, a business can invest in its future by expanding, buying new equipment, hiring key staff or retaining key staff by rewarding them further.
We see SMEs going out of business every day, in many cases due to cash flow because of late or non-payment. Prompt payment is vital to the cash flow of every business, and especially to smaller businesses.
Few things in business are as frustrating as a client who doesn’t pay promptly. Here are some quick turnaround strategies you can adopt to improve your cash flow today:
Do Invoice’s immediately
Invoicing must be an immediate action. The quicker you execute, the quicker you will be paid. Also, if you delay the invoice, it indicates that you not in too much of a hurry to get paid. Business owners are often slow at getting their invoices out once they have completed their work for a customer. Remember that your client has no obligation to pay until they receive an invoice, so don’t wait. Once you have sent the invoice, make a call and send an e-mail asking for confirmation that they have received the invoice and that the invoice is 100% correct.
Make payment terms crystal clear
You need to communicate the deadline on your quotes and invoices clearly as well as in all your telephone and e-mail follow-ups.
Make a personal connection with the ‘Money Team’
The key success factor in growing the top line is to build a sound relationship with the decision maker. What we forget to do is to also build a sound relationship with the person in the business that pays the accounts. Get personal with the ‘Money Team’ and get them to pay you first.
Use the telephone to chase money
Many experts in the field agree that making phone calls can be up to 80% more effective than e-mails and letters. Prioritise your cash collection and chase the oldest and largest debts first.
Offer a range of payment options
Offer a range of payment options to your customers and put your payment methods on all proposals, invoices and statements. For example, you might accept credit cards, debit cards, cash and EFTs. Different methods will suit different customers, so offer as many options as possible.
More invoices for smaller amounts
This is not always possible, but if it is possible, you want to avoid hitting your client with one, giant invoice. A client is more likely to sit on an invoice that is overwhelmingly large. Just make it easier for the client to pay you.
Know the numbers all day, every day
What is your cash balance right now? Who owes you money? What do you owe to your creditors? What are your sales figures today? Know exactly what your cash balance is, as well as all the key numbers in your business. Ensure that you have an effective accounting system, so you can produce these numbers anytime you need them.
Take care of your customers
By giving your customers your best and the very best in service experience, they will also tend to pay you first. The best way to improve your cash flow is to get your customers to pay you quickly.
Ask for partial payment up front
Instead of waiting to invoice until a job is completed, ask for a percentage of the invoice to be paid up front. This is common business practice and one you should capitalise on, if you can.
Incentivise your customers to pay you quickly
Once you have successfully delivered the service etc. the money owed to you should be in your bank account. You can get some customers to pay immediately by offering them a quick settlement discount if they pay within a certain time. A discount between 2% and 5% for paying within seven days will give your cash flow a healthy boost.
Review your age analysis daily
Review your debtors daily and identify accounts that are late paying or overdue. Then make the phone call or send out the letter or email requesting payment. Some customers just need reminding. The main cause of cash flow problems is “too many debtors”.
Stretch the payment of monies owed
Check your suppliers’ payment terms and determine when payment is due (30, 60 or 90 days). Then wait to pay until whenever the due dates are. Timing your business’s supplier payments will help keep your cash flow flowing, and will keep the cash in your business longer.
Disarm the excuses
Getting excuses for a late payment is common. The three most common ones are 1) I never received the invoice
2) the invoice details are incorrect or
3) I disagree with the invoice. To avoid this, call them almost immediately after you send out the invoice to find out that they have in fact received the invoice. Ask them if they have any questions about the invoice and make sure they are aware the payment is due in 30 days. To elaborate further, ensure that all the correct details are on the invoice before sending the invoice out. Few customers will rush to query an invoice that doesn’t look right – they just won’t pay it. Going backwards and forwards in correcting invoices is a big contributor to delayed payments.
Be the rainmaker in your business
Sales is everything – If you’ve got an abundance of sales, money can flow and if money flows you’ll fix thing in your business. To improve income issues, you want to create ‘make it rain’, because as the rainmaker in your business, you may search out, secure and retain huges client, bring in big money and conclude huge deals.
Keep reminding yourself that ‘Cash Is King’. Manage it with the respect it deserves. Cash is king, ‘no’ cash means ‘no’ business. Running out of cash is the definition of failure in business. Make the commitment to do whatever it takes so it doesn’t happen to you.