In this new era of difficult credit, cash is the life blood of your business. In this series of articles, we’ll look at bringing in cash faster, keeping cash longer, and increasing cash holdings.
Bringing in Cash Faster
- Have orders faxed to you, that way you’ll deliver and bill sooner.
- Send your invoice the same day the product is shipped or the service is delivered. You can prepare it ahead of time. Just date it and mail it on that date if you want to batch your invoices to save time.
- You can also email rather than mail your invoices. That will speed collections. But beware that many business owners are trained to handle the mail. An email invoice could be missed because it’s not part of the normal flow.
- Indicate clearly on the invoice when the payment is due. You can indicate when the payment is considered late and state what the late interest is. But make sure you can back that up.
- Know how the customer pays. When you began working with this customer, you can ask them what their normal pay cycle is. Some pay once a week, others on a certain day of the month. If you note that in the file, you’ll have a better expectation.
- Don’t let invoices get too old. If you’ve forgotten about an invoice, chances are the client has too. When sending a second invoice, include the note, “courtesy copy. This invoice is past due. Please pay promptly if you haven’t already.”
- Establish a regular procedure. Mail invoice copies at 30 days, 60 days, and 90 days. Call at 45 days, 65 days and one last time at 90 days before going to collections.
- Check customer satisfaction. Make sure they are happy with your work. If you do this early in the payment process, they’ll be more likely to remember that 99% of the work was satisfactory rather than dwell on that minute item.
- Put their phone number on the invoice. Statistically, that has improved the collection rate and speed.
- Follow up with a phone call. Call after 45 days. Find out if the payment was missed, by them, lost in the mail, or maybe even by you. When possible, give them the benefit of the doubt.
- Take a portion at the start of the project. Invoicing for part of the project at the start will cover the cost of materials as well as make cash come in faster.
- Accept credit cards. If you don’t already, begin taking credit cards. You generally get your money in 24 hours at a nominal cost of about 2%.
- Keep your Accounts Receivable report up to date and review it weekly. QuickBooks produces these with a few clicks.
- Beware of subcontracting. Sometimes working for someone who works for someone just seems too remote. Review their payment terms and yours at the start of the relationship and again at any time there seems to be a delay. Just letting them know you are on top of it can be the key to having your work paid on time.
Creating a system, watching the details, and maintaining good relationships with your customers will help collect cash faster, speed dollars to you, and improve overall cash flow.
A very good article for improving cash flow for contractors can be found at:http://www.contractingbusiness.com/25/Issue/Article/False/8882/Issue
Merra Lee Moffitt, AWMA, CMFC, CFP® spends all day, everyday helping business owners reach their financial dreams and goals by capturing business profits. She can be found at, 888-920-2030 or by email at email@example.com.