Cash Collection! Here's how to improve it.
By Eryan Haddon.
Generating sales is critical to business success, but that is only half the job done. Getting paid quickly for your product or services is just as important and is the key to good cash flow.
“A sale is a gift to customers until the money is in the bank” Nolan Bushnell
As owners of small businesses, we can sometimes feel helpless when it comes to getting your customers to pay their bills on time. But you just need to change your thinking. You are in the driver seat when it comes to your processes, systems and terms. So be proactive and make collections a top priority in your business.
Here are our Top Tips to Improve your Cash Collection:
- Formulate a clear strategy on customer credit, make this your policy and articulate this with your team so that know how they fit in.
- Timely and regular preparation of invoices. It is a proven fact that a customer’s desire to pay is much greater prior to or directly after receiving the goods or services.
- Request upfront payments on smaller job that will be done quickly or for customers with poor credit history.
- Request deposits or progress payments on larger jobs – especially if you are required to cover a lot of labour or materials in the interim. By the way, this absolutely is achievable in any industry.
- Be clear on your payment terms from the outset. Payment due immediately upon completion of the work is the new norm – no 30 days net.
- Embrace technology – offer pay now functions on your invoices. Online products such as Stripe and PayPal allow you to take instant payments and customers are much more inclined to pay immediately upon viewing an invoice if the option is available.
- Embrace technology – investment in accounting systems and programs that allow you to set and send automatic reminders.
- Monitor your Numbers. Know your Average Collection Days. Work with your business advisor to set a Goal and monitor this Key Performance Indicator (KPI).
Don’t be a bank for your customers – they can’t get interest free loans anywhere else! And remember:
Revenue is Vanity, Profit is Sanity but Cash is King!
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