There’s an old adage, “A sale ain’t a sale until the money’s in the till.” But receivables are continuing to haunt some businesses despite America’s strong economic recovery.
Slow-pay has become a habit for many customers.
As any entrepreneur knows, positive cash flow is paramount for business success.
Poor cash flow is the No. 1 headache because cash is king. That’s also why many businesses have failed after their lenders and credit card companies abruptly slashed the lines of credit.
It was a contributing factor for the Great Recession.
Too much money that’s due you but left sitting in a customer’s checking account is a recipe for business death.
Even if you finally collect, collection of old money costs you plenty and is worth less to you.
If you’re having challenges collecting money, true, you can blame the economy. But perhaps it’s worth your time to assess your invoicing.
Structure of invoices
The structure and the verbiage in your invoices could be contributing to your woes.
If your invoice simply indicates “Payable upon receipt,” you might be encouraging your clients and customers not to pay on time.
Many businesses use invoices that take the place of statements. I wouldn’t insert columns that indicate “30 days”, “60 days” or “90 days” as an aging report. That’s the purpose of a statement if the invoice is not paid on time and to show a paper trail of the account.
Otherwise, the psychological message you’re sending is “You don’t have to pay me in a timely fashion.”
Encourage a quicker turnaround by including the actual due date. That’s the seed you want planted in the mind of your customer.
When to discount
To improve cash flow, it’s usually a good idea to offer a 1-2 percent discount – if the profit is significant-enough and if your invoice is paid right away.
Another tactic, especially for consultants, is to present the invoice personally. In that way, you’ll get an instant report card on how the client feels about the relationship and your deliverables. (The ideal scenario is to work off a retainer.)
Besides, once you start making collection calls, you risk friction in what could be a good business relationship.
Finally, you might want to review your procedure for checking your prospective client’s credit and bill-paying history before you start your delivery process.
Make sure your payment-authorization agreement includes a provision for the customer’s signature agreeing to pay the invoice, and other expectations. But that’s another topic in itself.
Oh, and start relationships on the right footing. In the beginning, get a written agreement on when payment is expected.
From the Coach’s Corner, here are recommended articles:
How to Ease Debt-Collection Headaches — What are your choices when your accounts receivables reach 60 to 90 days past due? After all, cash flow is a paramount priority. Certainly, you don’t want to be too aggressive in debt collection and lose possible revenue from slow-paying customers – they might soon be able to pay you. Even a court judgment isn’t a cure-all. Nor do you want to let your receivables cripple you.
Step-by-Step Solutions for a Company Turnaround — If you’re struggling like many businesses, you know the myriad of challenges exacerbated by the economy. However, despite the challenges, it is possible for businesses to successfully complete a financial turnaround. First, you might have to put on a different set of glasses – see this economy as a marvelous opportunity.
14 Steps to Profit from Online Customer Reviews — For competitiveness and profits, businesses can’t afford to ignore the potential of online reviews. They’re a factor in revolutionizing commerce. Reviews are important because they influence prospective customers to buy from you. They’re also beneficial in improving your Internet presence because search-engine crawlers consider them to be relevant.
Quick Checklist for Profits You Can Implement Today — Here is a top-10 checklist for profits: 1. Review and fine-tune your business plan. Be sure to discern your competitive landscape and benchmark your main competitors. 2. Bring on the A team – both in staff and advisors. Recruitment and training will remain important, and seek the best mentors and professionals for inspiration to help you sustain growth…
For Stronger Profits, Avoid 11 Typical Pricing Mistakes — In general, how can you manage the sweet spot – between your price-optimization and costs? Dennis Brown of the consulting firm, Atenga (www.atenga.com), says many companies make 11 pricing mistakes: 1. Companies base their prices on their costs, not their customers’ perceptions of value. “In certain circumstances, there are strategic reasons a company may decide …
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