In the ‘good old days’ the onus on prompt payment was on the customer. That made it much easier for business owners to manage their cash flow.
Now, along with everything else you have to do, the onus on managing your cash flow is firmly on you, the business owner, so we have put together our 7 top tips to help you out.
1. It Pays To Do Your Homework
For bigger customers you may need a signed contract and a purchase order. Find out what you need and their payment terms in advance. For example they may have money left in a budget and need invoicing straight away. For smaller customers make sure you agree the price in advance so there is no query on your invoice. Obtain the mobile number of your contact at the company and if possible find out the name of someone in the credit control department in case of a query.
2. Don’t delay
Invoice immediately on completion of the job, or if appropriate take a 50% deposit up front with the remainder payable on completion.
3. Payment terms
Ask for what you want. Don’t feel you have to put ‘Payable within 30 days.’ Either put ‘Pay on receipt’ or a due date within 14 days. If you don’t ask, you won’t get.
4. Check Your Bank Account Regularly
It is worth taking the time to find out immediately whether payment has come through, and if you use cloud accounting software, your bank balance will update regularly so you will know straight away.
5. Don’t Be Shy
If you don’t receive the money when you expect it, ring up your contact in the business and find out why. Why not email? Emails are too easily ignored. Your contact may be able to chase up payment for you, or give you the number of the person you need to speak to.
6. Don’t Take ‘No’ For An Answer
If you don’t get a response, keep trying. Not just every day, but several times a day if you need to. Imagine how it would be if the tables were turned and they were owed the money? Surely they would chase it up.
7. Cash Flow In Other Parts Of Your Business
The two other main areas where you can control cash flow are stock and suppliers. Keep a close eye on your stock, as perishable stock or slow moving stock can suck cash unnecessarily from your business.
Check your suppliers’ credit terms, and use them. Bear in mind however that your long term relationship with your suppliers is like a gold nugget in your business, and they will respect you and respond to your needs if you always pay on time.