Are you spending more time chasing your cash than making cash?
Are you wasting time chasing people for money and dodging calls from those chasing YOU for money?
Its time as an entrepreneur to ensure sure your cash is chasing you and here is how:
The Risk
If your customers are not paying you regularly and on time chances, are you are struggling to pay your bills. The net effect of this is not good.
- You risk negatively affecting your own credit rating.
- You won’t be in a position to pay your employees or your suppliers on time.
- You are prevented from investing in other areas which could have proven fruitful for both your business and yourself in the long run.
Here are 7 ways to control your customer payments more effectively:
1) Implement Systems
Implement systems and processes that ensure you invoice correctly and in a timely manner:
Having accounting software set up and used correctly enables you to know who you have invoiced, when you invoiced them as well as if their accounts are overdue.
An established accounting system allows you to set up automatic reminders for overdue payments, payment triggers (such as a direct debit system) as well the capability to set up recurring invoices weekly, monthly or annually, this saves you time!
One of my favourite accounting systems is Xero as there are so many automation opportunities and apps that you can attach to your profile to not only save you time, but also ensures that you ‘don’t forget anything!’
2) Know who owes you
Understand your data so you are crystal clear in terms on who owes you money:
You can have the greatest accounting system on earth, OR a simple Excel Spreadsheet BUT…. If you don’t understand the figures, you are no closer to knowing who owes you money, how much they owe you and when they should be paying you.
Knowing WHAT you are looking for within that data is key and this is where you want to ensure that you have a bookkeeper with a “nothing is a stupid question” attitude. Remember your bookkeeper understands that data with ease, that is WHY you have engaged with them as the professional. Do not be afraid to ask questions until you fully understand the data!
By knowing what reports to run, you are in a position to be up to date and on top of your outstanding payments and ensuring you don’t have customers who have fallen behind on their commitment to you.
Again, Xero is a system that is “nice and easy”. Easy for you to input data, easy for your bookkeeper to analyse and explain and easy for you to understand!
3) Work with struggling customers
Consider discussing payment plan options with customers who are struggling to pay:
By understanding your data and knowing which customers are potentially struggling, you are able to have the “awkward discussions” with ease and empathy.
Often creating a payment plan allows a customer to service their debt with you.
It is crucial to be able to identify these customers early, the longer you leave it, the more they owe, the harder it is to get that account settled.
This can feel incredibly daunting….. why?
· You may not know HOW to set up a payment plan that is mutually beneficial.
· You may have a relationship with that customer that you don’t want to risk to ruin by having that “awkward conversation”.
Having a bookkeeper who is unafraid to have those conversations on your behalf, to assist your customer with different options, and being able to handle the call objectively is a “win-win” for yourself, as well as your valued customer.
You get your money, your customer feels good about the options presented.
4) Onboard clients with Payment Plans
Set yourself up for success with new clients by setting up direct debits and credit card facilities:
Anyone who has a regular monthly retainer is the perfect opportunity for you to set up direct debits with them.
This ensures that your system automatically send a recurring invoice, and that your customers account will automatically be debited on the same day each month, This means you are not spending time “chasing payments”, and they are not wasting time setting up monthly payments to you!
Direct Debits are ideal for Service based businesses where you are billing on a weekly, monthly or annual basis. If you offer a subscription offering as well as for, delinquent payers as this allows you to control the payments, as opposed to them “getting to it sometime (which may be never!)”
Your bookkeeper is able to set these systems up for you with ease.
5) Use Project Payments Plans:
Set yourself up for success by requiring project payments plans:
This advice is for businesses who are working on specific projects. i.e. Architects or Builders.
These are conversations that need to be had before you start the work! If both parties know WHEN money is due as well as how much it ensures that you are not having to convince and explain the terms “as you go”.
Generally a % deposit would be taken to start the work with progress payments as one works through the project.
6) Focus on your Payment Terms
Ensure your payment terms are correct for your needs and your industry:
Often customers pay an invoice when THEY want to pay! By displaying the T&C’s of engagement and ensuring they are reasonable avoids the conflicts that one often sees when it comes to customers actually paying!
7) Work with your clients corporate systems
When dealing with big corporates, ensure that you follow their processes to the T and take into account their payment terms in your planning:
Some larger firms dictate how they going to pay and when they are going to pay. It is essential that this is outlined from the start. As an example: if they are on “60 / 90 / 120 days” this may affect your cashflow which can impact your resources in ensuring you meet your obligations.
Your bookkeeper is able to work with you to ensure that you ‘don’t go under” whilst waiting for payments that take longer than usual to come in!
Summary
In Summary, by implementing the following into your processes and systems you will have the peace of mind that you are not chasing money when you would rather be making money!
- Implement systems and processes that ensure you invoice correctly and in a timely manner.
- Understand your data so you are crystal clear in terms on who owes you money.
- Consider discussing payment plan options with customers who are struggling to pay.
- Set yourself up for success with new clients by setting up direct debits and credit card facilities.
- Set yourself up for success by requiring project payments plans.
- Ensure your terms are correct for your needs and your industry.
- When dealing with big corporates, ensure that you follow their processes to the T and take into account their payment terms in your planning.
Your Bookkeeper Should Help
Your Bookkeeper should be helping you so that your cash chases you by:
- keeping your records tidy and up to date so you always know where your money is.
- negotiating prices and terms with customers & vendors to ensure you are getting the best from both.
- making those difficult calls to chase outstanding monies
