Advice

By Jennifer,

Increase cash collection by 25% in 6 weeks or less

Many business owners struggle to reconcile the two apparently conflicting relationships of selling to clients and asking to be paid – it’s a dilemma that’s commonplace and if you feel this way you’re not alone. There’s often a fear that “chasing your payment” will cause customers to go elsewhere.

Here are some tips that will help you manage these (potentially) opposing relationships with customers, and give you a process to make it easier (and nicer) to ask for your money and get paid. Our statistics show that following this process can increase cash collections by at least 25% in a six week period, often much more.

Remember that getting paid begins with the sales process – agree payment terms as part of the sales process – not afterwards, and make sure you send terms and conditions before you start work. Ask your customer how they want you to submit invoices – who you send them to, via email or snail mail, quoting a purchase order number, etc, etc.

Is there an easier way you can get paid? – many of our clients have seen the benefits of offering alternatives, like direct debit, credit cards and even paypal as payment options.

Send your invoices out promptly, don’t wait until the end of the month, as in practice this just extends the time it takes to get paid.

Approach credit control as a customer service activity, not an “anti-customer” activity. A week after sending an invoice, call your customer (ideally their finance department) to check that it’s been safely received and there are no issues – this increases your chances of getting paid on time by a factor of 3! And it’s nicer than calling and berating them for not paying you once it’s late.

Make it a priority in your company to call customers and confirm payment dates – not just something that happens when someone “gets around to it”, or when you’ve hit your overdraft limit and can’t pay anyone! Better still, make it one person’s responsibility and make sure you review progress with them every week.

Phone customers, don’t rely on emails as they’re far too easy to ignore. When you telephone you’re in control of the conversation and can handle any issues immediately.

Make sure you get the answer to the right question – which is: “when will the money be in my bank account?” – it isn’t: “when are you writing the cheque?”, “doing the payment run?”, “getting the cheques signed?”, etc, etc.

Have an escalation process for people who still don’t pay their invoice.

Don’t be afraid of issuing that 7 day letter and then following through on it – people who don’t pay you are not customers…

Best Wishes

The YRH Finance Team

 

jenGood luck, and remember – don’t “lend money” to people you don’t know – check out your customers before you sell to them!– Jen Raines

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