Want to listen instead? Click Here
Cashflow is without a doubt the number one issue faced by small business owners. Almost every survey, poll or graph highlights this, and even if they didn’t, we all know ourselves that this is most definitely the case!
We work with a number of small businesses in a wide variety of industries and sectors, and thought we’d share with you some of the best processes we’ve learnt and implemented.
1. Reduce Payment Terms
Whilst the perceived ‘norm’ for payment terms is 30 days, there is no actual rule or regulation that truly says this must be the case. If you’re a B2B provider that issues invoices on a monthly basis you can decide when they are due. This may vary from client to client as agreed or you may decide on a generic approach, the point is, if you want your invoices paid within 14 days instead of 30, then this is your decision. The benefits here are that payments are received regularly throughout the month, and if you have late payers, their perception of how late the invoice is increases. Whilst you still might not receive the payment on time (within the 14 days), you’re much more likely to receive it within 30 days!
2. Invoices Due At Different Times Of The Month
Though creating invoices at a set time within the month may be useful for your time management, it’s not ideal for cashflow. Creating invoices weekly with varied payment terms as you see fit or as agreed with your customer will help to ensure that you have fresh payments cycling through the business every week. It will also help with Credit Control and keeping on top of late payers. The benefits here are that payments will flow more regularly throughout the month. If you have 30 day payment terms, and space out your invoices to be sent (let’s say) each Friday, after the first month you will start to receive fresh income each week.
3. Speak To Account Payers Regularly
The best way to ensure your invoices are paid regularly and on time is to ensure you have a good working relationship with your clients. Speaking with them on a regular basis about what’s happening in their business and understanding if there may be reasons to stop them paying your invoice on time will help to mitigate this actually happening. By simply following up once you have sent invoices out to ensure they have been received, and there are no queries, proactively reduces the likelihood of last minute ‘no pay’ reasons. It also helps build an open relationship and shows your clients that you’re happy to work with them and be flexible where needed, and encourages them to be the same with you.
4. Get Someone Else To Cover The Credit Control
Another great way to help ensure your payments run smoothly throughout the month is to enlist the services of an independent person to conduct your Credit Control. This ensures you keep your working relationship with your client, they can vent any frustrations to you about your Credit Control person, but ultimately don’t ‘blame’ you, as the Credit Controller is merely doing their job. It’s the age old ‘good cop’ ‘bad cop’ routine, but really works when it comes to maintaining relationships and getting paid!
5. Invoice On Time!
An obvious but easily and frequently overlooked factor in cashflow. Whilst it can be hard to keep on top of all of your paperwork and do the work too, invoicing should never be sacrificed. Book a regular spot in your calendar each week/month and above all else, once you’ve done the work, get the invoice out there!
We have lots of experience when it comes to cashflow improvement and credit control, so please don’t hesitate to get in touch if you’d like to chat through your current processes and how they could be enhanced – T: 01903 688789 E: makeithappen@mbsmih.com