Everyone has likely heard the phrase “cash is king.” Cash is the blood in a business and it’s critical that it keeps flowing. Cash flowing out of your business is within your control, but where things get tough is cash coming into your business (you can’t always force customers to pay you on demand). Here are five tips that I’ve found to be very effective in keeping customer payments flowing:
1. Provide a clear quote at the beginning: if a statement of work and price is agreed upon at the beginning, it’s difficult for a customer to question something later on.
2. Invoice quickly: It’s easy to put this on the back burner with all the other paperwork you have to do, but make time to get your invoice in the customer’s hand right away. This helps reduce the time it takes for them to pay you.
3. Follow up right away: After you send the invoice, do a separate email/phone call to talk about the work performed, to make sure everything is satisfactory and answer any questions. You also slide in a question to confirm they received the invoice. This step reinforces your customer service (no one calls after the sale to make sure things are fine) and it confirms they have the invoice in hand (how many times have we all heard “I didn’t receive it”).
4. Proofread your own invoices: Make sure your invoice has your correct address, price, HST number, HST amount, payment terms (do they have 30 days or pay right away), and what forms of payment you accept (i.e. credit card, EFT, cheque). A clearly laid out invoice helps avoid any mix-ups.
5. Track your invoices: Every accounting program has an Accounts Receivable chart that lays out all the invoices outstanding and how long they have been outstanding. If the invoice has been outstanding too long don’t be shy about following up (rule of thumb is once an invoice is past due it’s good to call. The longer an invoice is outstanding the less likely it is to get paid, so if too much time has passed and you still haven’t been paid you need to get more aggressive in collecting your money (stop emailing and start phoning, stop in for a visit, or use a collection agency). The squeaky wheel always gets the grease, so if a customer is having cash flow issues and not paying everyone, chances are you’ll get paid before most just because you’re asking.
Every industry and business is different, so these tips may need to be adapted for your business. This list is not exhaustive, so if you want help improving cash flow feel free to call for personalized guidance.