There’s an old adage, “A sale ain’t a sale until the money’s in the till.” But increasingly, receivables are continuing to haunt businesses as their customers struggle in the much-awaited recovery. Slow-pay has become a habit for many customers.
As any entrepreneur knows, positive cash flow is paramount for business success. Poor cash flow is the No. 1 headache because cash is king. That’s also why many businesses have failed after their lenders and credit card companies abruptly slashed the lines of credit. It’s a contributing factor for the downturn.
Too much money that’s due you but left sitting in a customer’s checking account is a recipe for business death. Even if you finally collect, collection of old money costs you plenty and is worth less to you.
If you’re having challenges collecting money, true, you can blame the economy. But perhaps it’s worth your time to assess your invoicing. The structure and the verbiage in your invoices could be contributing to your woes.
If your invoice simply indicates “Payable upon receipt,” you might be encouraging your clients and customers not to pay on time.
Many businesses use invoices that take the place of statements. I wouldn’t insert columns that indicate “30 days”, “60 days” or “90 days” as an aging report. That’s the purpose of a statement if the invoice is not paid on time and to show a paper trail of the account. Otherwise, the psychological message you’re sending is “You don’t have to pay me in a timely fashion.”
Encourage a quicker turnaround by including the actual due date. That’s the seed you want planted in the mind of your customer.
In downturns, it’s usually a good idea to offer a 1-2 percent discount – if the profit is significant-enough and if your invoice is paid right away.
Another tactic, especially for consultants, is to present the invoice personally. In that way, you’ll get an instant report card on how the client feels about the relationship and your deliverables. (The ideal scenario is to work off a retainer.)
Besides, once you start making collection calls, you risk friction in what could be a good business relationship.
Finally, you might want to review your procedure for checking your prospective client’s credit and bill-paying history before you start your delivery process. Make sure your payment-authorization agreement includes a provision for the customer’s signature agreeing to pay the invoice, and other expectations. But that’s another topic in itself.
Oh, and start relationships on the right footing. In the beginning, get a written agreement on when payment is expected.
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“Success is the sum of small efforts, repeated day in and day out.”
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.