The Business Edge Blog

April 19, 2011

Cash Flow – Collecting Your Due

Interesting question from Ron (Helpful Herb) in response to a recent post. ……”Any suggestions on how to improve cash flow?  Receivables are nice but I can’t spend them until they are paid.”

A number of my clients have asked the same question recently.   

Cash flow is tight for some and collecting quickly is key to survival.  After reviewing their procedures, I have found that some clients have major delays in their billing.  I can tell you that the later people receive an invoice after the service is provided, the longer they delay the payment.  I don’t know why, it seems to be a human nature thing.  

Consider creating an invoice on the spot.  Think of all the times you have paid for a service immediately – you expected to didn’t you?  You simply learned what was due and paid it – right then and there.  Examples that have occurred in my life recently are a haircut, a dentist appointment and house cleaning.  If you think you can’t create an invoice on the spot, comment below and tell me why you can’t.  I may have some ideas for you.   

If you still think you can’t create an invoice on the spot – which encourages getting paid immediately – set aside time each week to invoice for the week’s work.  One of my clients decided to create invoices at the end of each day.  That’s a great concept, but may not work for all of us.  

When you create your invoice, what terms do you provide?  I encourage clients to review their terms.  If you are giving your customers 30 days to pay, then don’t be surprised if they mail the check on the 30th day or later.  Consider changing your terms to “due on receipt”.  It will encourage some of your customers to write the check when they open the envelope or open the email containing the invoice. 

How long should you wait to re-send an invoice that has not yet been paid?  No longer than monthly.  Don’t be shy about highlighting the fact that the payment is past due.  The people who invoice you are not shy.  Pay close attention to the bills you receive and copy best practices. 

Make the changes you need to.  It will improve your cash flow situation.  Comment below on the changes you are committing to make in your business and your success stories.

Advertisements

4 Comments »

  1. Try Net10, 2% discount if paid upon receipt. It may not be a lot but people love a bargain.

    Comment by Mike Bayer — April 19, 2011 @ 10:40 am | Reply

    • Great suggestion Mike. This also works well for some of my clients who can handle the 10 day float if people do not choose to take the 2% discount.

      Comment by bizcoachholly — April 19, 2011 @ 5:00 pm | Reply

      • Your article on cash flow was very interesting. What do you think about technology and what role it will play in the future.

        Steve

        Comment by Steve & Maureen — April 26, 2011 @ 6:44 am

  2. Steve – I encourage my clients to use as much technology as they are comfortable with, stretching them to learn more and become more comfortable all the time. In keeping with the message in the blog post, I like the new tool called Square. It is a tiny white square (about the size of a quarter) that connects to a smart cell phone (in one of the ports) and accepts credit card payments on the spot. On setup you link the swipe to your bank account and download the application to your smart phone. So, when you provide service or sales, collect your payment on the spot!

    Comment by bizcoachholly — April 26, 2011 @ 7:21 am | Reply


RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Blog at WordPress.com.

%d bloggers like this: