Cashflow is the lifeblood of your business. It’s also the most common cause of stress. Here are 10 easy ways to boost your cashflow:
1. Agree your Terms of Trade at the start of EVERY job.
Your Terms of Trade should cover when and how you’ll invoice, when you expect to be paid, and the consequences of late payment or non-payment.
2. Give payment options.
Consider a small discount for payment upfront, ask for a deposit before beginning the work, or offer funding through an outsourced provider.
3. Invoice on time and in line with your Terms of Trade.
Don’t procrastinate by doing more work before you invoice. Better still, get someone else on your team to be responsible for invoicing.
4. Have two columns on your statements – current and overdue.
Delete any references to 30, 60 or 90 days overdue as this can create an expectation that it’s okay to pay on those terms.
5. Make it easy to pay.
Email your invoices and statements (online software such as Xero is great for this!), put your bank account details on your invoices and statements, and accept payment by credit card.
6. Monitor your collections daily.
Use a cloud-based, real time system to monitor payments received.
7. Put ONE person in charge of collecting debtors.
This shouldn’t be the business owner or the person who made the sale or did the work. Outsource debtor management to a bookkeeper if required.
8. Follow up non-payment.
The day after your job is completed, ensure your customer is happy. If they fail to pay by the due date, ensure they’re followed up the next day.
9. Don’t do more work for non-payers.
If a customer has overdue payments, don’t accept further work until their balance is paid in full.
10. Use an outsourced debt collector.
If you’ve followed these steps and still haven’t received the payment, use an outsourced debt collection company to recover the payment. This should form part of your Terms of Trade so it is part of your normal process – you’re not a bank!
Remember, a sale is not made until the product or service has been delivered AND the money is in your bank account.
Need help with your Terms of Trade and debtor management policy? We can help!
“Revenue is vanity, profit is sanity, cash is reality.” – Anon