As if getting the sale, delivering your product or service, and satisfying your customers wasn't hard enough...getting paid on time can be even harder! But implementing these tactics will make it easier.
Invoice Immediately: How often do you invoice? Many businesses use part time bookkeepers to do their invoicing, and hence invoice only once per week or month. Instead, invoice as soon as the work is completed, even daily if possible.
Deposits and Progress Billing: If there are major upfront expenses for materials, or your services are being delivered over a long period of time, it is quite reasonable to require deposits and billing in stages before all the work is completed.
Use Specific Due Dates: The default due dates on many accounting systems are “Net 30”. Change the due date to be the exact date the invoice is due.
Print Invoices on Colour Paper: Invoices printed on plain white paper and mailed in window envelopes look just like everyone else’s. Colour paper makes your invoices stand out, and may encourage your customers to pay you ahead of others.
E-Mail Invoices: This will get your invoice into your customer’s Accounts Payable system sooner. Be sure to use the “Request a Read Receipt” feature of your e-mail program.
Follow Up by Phone the Next Week: Don’t wait until an invoice is overdue to make your first call. A quick phone call the following week will ensure that the customer has received your invoice, agrees that everything is in order and that all work was performed to their satisfaction. If there is a problem you can fix it right away, and avoid additional delays in getting paid.
Offer Discounts for Early Payment: If you do offer terms, consider a “2 - 10 / Net 30” policy. Create the invoice as you normally would, and enter a comment line such as “2% discount for payment received by [specific date]” and include the revised total. Also let your client know by phone that you are offering the discount.
Deposit Cheques Immediately: It only takes a few minutes on your way elsewhere to stop at the ATM and make a deposit. (That being said, make sure you know your bank account’s hold policy as sometimes it is longer for ATM deposits!) The sooner you make the deposit, the sooner you will know that the cheque has cleared.
Accept Credit and Debit Cards: This can make it much easier for your customers, especially if your industry does not typically accept them. Collecting credit card points also motivates customers to pay. Many business organizations, including your local Chamber of Commerce, the CFIB, and even Costco, offer members preferred rates for processing.
Accounts Receivable Financing: This is an alternative form of financing also known as “factoring”. The factoring company essentially buys your receivables at a discount and pays you by direct deposit within two or three days of confirmation of product / service delivery. Some providers also take care of collecting from the customer, giving you more time to go after the next sale. This can be a great way to finance growth, for both established and start-up companies.
Purchase Order Financing: Similar to factoring, the lender advances you funds when you make your sale and receive a purchase order or contract. This type of short term funding allows you to purchase the materials necessary to fulfill an order you may not have otherwise been able to accept.
In the Part 2 I will share tips on controlling expenses to help manage cash flow. Click here for Managing Cash Flow - Part 2 - Controlling Expenses.
By Peter Forint, BA, MBA