Does it feel like your bank account never seems to grow as fast as the demands on your time?
If you don’t have control of your cashflow, you’ll always be under stress, even when sales are up.
Here are 3 tips for getting your cashflow back under your control:
1. Invoice Quickly
If you take your time invoicing, your customers will think it’s OK to take their time paying you. But if you invoice immediately, they’ll often feel a duty to pay you immediately.
I worked with a plumber who was notorious for slow invoicing. Even for routine jobs his invoices were often several weeks out. We developed a process to reduce invoicing time to 48 hours for most jobs, which increased payment turnaround time and greatly improved his cashflow.
2. Be the Squeaky Wheel
While reviewing the balance sheet for an electrical contractor, I saw they had over $1.5 million in Accounts Receivable. I had to ask the owner if that amount was real. After checking with her team, she confirmed it was, and that most of the payments were 120 days or more past due.
They had a really good process in place for getting invoices out, but no process at all for making sure they got paid.
She and her general manager divided up the accounts and started making phone calls. Within 10 days they had collected over $850,000 in payments. Cashflow problem solved!
The bottom line is, be the squeaky wheel to make sure you get paid on time. Have a system in place to monitor your A/R, send payment reminders, and to make phone calls as soon as payments are past due.
3. Get to know your customers’ payment preferences.
Find out what the easiest ways are for your customers to pay and have those options available. If you make it hard for customers to pay, your cashflow will suffer.
If you’re a B2B, always ask each customer what their payment process is. Get to know the billing person, what their payment and invoicing preferences are, and what documentation they need to set you up as a vendor. Establishing a good relationship with them early on will help speed up your payments, keeping your cashflow steady.
If you want to improve your cashflow, schedule a 20 minute call and we’ll identify your particular cashflow challenges and come up with some strategies to get it back under your control.
Author: Mark McNulty, Business Coach in Louisville, KY