The one thing I hated the most when running my last business was waiting for money to arrive. It was agony: I’d have paid all the expenses, but have to wait between 45 and 60 days for my payment to arrive.
You might even think that it is funny for me to be writing about the subject of debtors and cash flow given that many marketing types (like me) just take the whole process for granted. We like spending money rather than making sure that it comes in.
The point is that most business owners hate chasing money; if you’ve delivered the service you just want to be paid. So a few of us put our heads together to come up with some ingenious ways of reducing debtor days. This is what we came up with.
With large accounts (in my consulting business) I changed my terms to 50% in advance, and I would not start work until that was received. This gave me a pretty quick idea on how the accounts worked in that company. It just not always possible to be paid in advance.
The most common excuse people give for not paying the invoice is, ‘Oh, I can’t find it, it is misplaced’, or, ‘I don’t know where it is. Can you send it again?’ Even the process of resending an invoice takes to much time.
One thing we have done is call each person as soon as the invoice is sent to ensure it was received. We then ask what the sign-off process is and the name of the person who will be dealing with it. Then we remind that person of the due date, which is printed on the invoice. Printing the due date instead of “terms 14 days’ makes clear when we require payment.
We also worked out that it is much cheaper to pay the merchant fees on company credit card payments than chasing small invoices. So on any amount under $1000 we request credit card payment.
Some people use brightly coloured paper for their invoices, some send minties with the invoice. One client runs a reward program, giving points to customers who pay on or before time and deducting points for late payers.
Money owed is a problem that just cannot be ignored. It just does not fly in by itself. We have found that taking a clear line with customers has set us free, and being consistent with late payers by putting them on stop supply is essential. After all, it’s not a sale until the cash is in the bank. Whose money is it anyway?

Grow & Scale Your Business by Naomi Simson

Tell Naomi a little bit about your business by completing the questions below. (It will take less than 60 seconds)

Answering your #1 Biggest Business Challenge question tip: 

Go beyond just saying "Poor Cashflow" or "Unreliable Team". 

Instead, give Naomi details & specifics on how this is currently your #1 Biggest Business Challenge. 

I.e. "Every month I'm struggling to pay my bills on time because there just isn't consistent cash flow coming into the business. I've tried sticking to budgets in the past & pay myself less to keep some extra funds aside for emergencies, but still every month there seems to be another financial fire to be put out. I don't know what to do about it, so I'm just grinding it out."

 

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