- July 20, 2018
- Posted by: saenicsa
- Category: Uncategorized
“A happy business owner is one with a positive cash flow”, is a saying that has a lot of truth to them. This is because there are many headaches that can be avoided by having sufficient cash to pay employees, bills and even oneself.
In a perfect world every client would pay their fees when due – or even before so – but because we do not live in a perfect world let’s consider a few recommendations of what can be done to help resolve this common problem that many small and medium sized businesses have.
Be flexible – Most likely the majority of your clients want to pay you, so if you’re having difficulty having a positive cash flow, the problem might be you – not them. What do I mean? I am referring to a business that has inconvenient payment methods.
For example, do you accept credit and debit cards? Do you accept electronic transfers? PayPal?
Being flexible with payment methods may be the most practical and quickest ways to improve cash flow.
Encourage your clients to pay – Sometimes clients need a little positive reinforcement to make their payments. This positive reinforcement can take many forms.
For example, do you offer discounts for early payments of fees? What about a discount when a client agrees to an annual or extended contract? Have you ever tried offering an “early bird special”?
On the other hand, another method of “encouraging” prompt payment may actually be by penalizing a client via late fees and interest.
Either way we recommend to establish a written company policy so as to not undercharge or overcharge clients.
Establish a cycle – Establishing an invoicing cycle is also a very practical method to implement. An invoicing cycle is simply agreeing with your client that by every certain date of each month your invoice will be sent to them and they will have “X” amount of days to pay.
Of course, make sure that payment is requested within a reasonable amount of time before actually needing it – usually 10 to 15 days – and be sure that your clients are aware of these terms.
Establishing billing cycles will assist both yourself and your clients into having cash flow positive payment habits.
Invoice dates are important – As an auxiliary point to the tip mentioned above, keep in mind that during the month there may be certain dates where your clients may be in the same situation that you are.
What I mean by this is that they too may be trying to charge their own clients to be able to pay their vendors (you). If you want your clients to pay you on time make sure your invoice cycle is agreeable to them.
Follow up – If after having billed and waited for either a client’s response or payment, to receive neither is worrisome. Try not to get overly anxious, sometimes these situations arise because of an unexpected emergency or simply because of a client’s overzealous email spam filter.
So first, before doing anything else, try following up on your initial email and confirm with your client whether they have received their invoice. In case of no response, try contacting them by phone to speak with them and just kind of check in to that everything is fine.
The important thing to do is to establish contact with your client, make sure that they are well and then confirm payment dates.
Legal Options – Unfortunately there are situations that may merit the recurrence of legal means to receive payment. Of course, this is a last option, but it may also be the only option with certain clients. Keep in mind, that going down this road will most likely burn all bridges between yourself and your client. Also, to do so it will be important to have impeccable accounting records and contracts, in addition to proof of prior collection attempts.
If you haven’t already, try putting into practice a few of these aforementioned tips. Your cash flow is everything to your business, without it you can’t exist.
In this article we discussed how important it is to keep your cash flow positive and how to keep it that way. If you are interested in knowing more about how our firm can help your business, feel free to contact us here to find out more. Not only can we assist you in transitioning to a new platform, but we can also guide you in choosing the best one for you.