Cash flow is the lifeblood of all businesses. When challenged with the pressure of doing business every day, it’s important to remain positive and energetic. A cash flow crisis is destructive, negative pressure that eats away the positivity and slows down the productivity. Commit yourself to freeing yourself from money worries and get your cash flowing again so that you can create the business you’ve dreamed of.
One of the biggest challenges for business owners is getting customers to pay on time. If this problem continues to exist for too long, it can even shut down the whole business.
For any business, the amount of money flowing in or out is critical to its success. Paying basic bills can become difficult when the money is too tight. But when there is plenty of cash, a business can focus on investing in its future. It can expand, buy new equipment, hire new key staff or retain existing key staff by giving them further rewards.
SMEs sadly go out of business all the time, often because of issues related to cash flow. Payments may be late or invoices may not get paid at all. Prompt payment is essential to the cash flow of every business, but it has even greater importance to smaller businesses.
Not many things are as frustrating in business as a client who doesn’t pay on time. Here are some strategies to help you turn things around and improve your cash flow:
Invoicing must be done immediately. The quicker the invoice is sent, the quicker you will be paid. Delayed invoice also indicates that you’re not in a great hurry to get paid. Business owners tend to be slow at sending invoices out once the work for the customer has been completed. Keep in mind that clients don’t have to pay until they receive an invoice, so don’t wait. After sending the invoice you can make a call and send an email to confirm that they’ve received the invoice and that it is 100% correct.
Make payment terms crystal clear
Leave no room for confusion when communicating the deadline on your quotes and invoices. Be clear in all your phone and email follow-ups as well.
Make a personal connection with the ‘Money Team’
Building a good relationship with the decision maker is the key for successfully growing the top line. However, we tend to forget that we need to build a sound relationship also with the person in the business who pays the accounts. Get personal with the ‘Money Team’ to get them pay you first.
Use the telephone to chase money
Many experts in the field agree that phone calls can be up to 80% more effective than emails and letters. Prioritise your cash collection and go after the oldest and largest debts first.
Offer a range of payment options
Offer multiple payment options to the customers and put them on all proposals, invoices and statements. For example, mention that you accept credit cards, debit cards and cash. Different methods suit different customers, so make sure you offer as many options as possible.
More invoices for smaller amounts
If possible, avoid sending one giant invoice to your client. When a client receives an overwhelmingly large invoice, it’s more likely that they delay paying it. So make paying easier for your clients.
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? Make sure you know exactly what your cash balance is, and all the key numbers in your business. Having an effective accounting system is important so that you can see check the numbers whenever you need them.
Take care of your customers
By giving your customers your best and the very best in-service experience, they often 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
Don’t wait until the job is completed but ask for a percentage of the invoice to be paid up front. This is a common business practice and you should adopt it if possible.
Incentivise your customers to pay you quickly
After you have successfully delivered the service or product, the money owed to you should be in your bank account. Offering a quick settlement discount if customers pay within a certain time can do the trick and make some customers pay immediately. Offering a discount between 2% and 5% if customers pays within seven days can boost your cash flow.
Review your age analysis daily
Review your debtors daily and identify accounts that are late paying or overdue. Make a phone call or send out a letter or email where you request payment. Some customers just need a reminder. The main reason for cash flow problems is usually having too many debtors.
Stretch the payment of monies owed
Check your supplier’s payment terms and determine when payment is due (30, 60 or 90 days). Wait for the due date instead of paying immediately. Timing your supplier payments help to keep the cash flow flowing and it keeps cash in your business longer.
Disarm the excuses
Getting excuses for late payments is common. The 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 these issues, call clients almost immediately after you have sent out the invoice to find out if they have received the invoice. Ask them if they have any questions about the invoice and make sure they are aware of the due date. It’s important to ensure that all details on the invoice are correct before sending it out. When customers receive an invoice that they suspect is incorrect, there are only few who will contact you to ask questions. Most people simply don’t pay it. Spending time on going backwards and forwards in correcting invoices contributes to delayed payments.
Be the rainmaker in your business
Remember that sales is everything. When you have plenty of sales, cash flows and if cash flows, you can use it to fix anything in business. To solve cash flow problems, you need to make it rain. As the rainmaker in your business your task is to seek out, secure and retain big clients, bring in big money and conclude big deals.
Keep in mind that “Cash is king”. Manage it with respect because no cash means no business. Running out of cash means failure in business. Commit yourself to doing everything you can to prevent it from happening to you.
e definition of failure in business. Make the commitment to do whatever it takes so it doesn’t happen to you.