These Tips Will Keep the Cash Flow Strong in Your Business

When it comes to any successful business, a healthy, positive cash flow is absolutely vital.

Cash flow is required because not only do we want to make money from our businesses, but we also want to make sure we can pay for everything we need to, including our own bills and actually pay our own staff members.

Now, it’s totally normal for your business and its cash flow to be strained at points throughout your business’s lifespan.   Even the biggest and best businesses will have had some strife when it comes to their books. The important thing is to recognise and realise the cause behind why your business is struggling.

There can be many reasons for poor cash flow – perhaps your business just isn’t that profitable, you haven’t budgeted properly, you might be inexperienced at managing a business, or perhaps it’s because you’re not getting paid the money you’re owed.

In fact, for many Australian businesses, the number one cause of their cash flow problems are their customers not paying on time or at all. When your customers don’t pay, it not only causes money problems in your business, but it can be a highly stressful time. Causing stress for you, as the business owner, and for your staff.

When customers don’t pay, it can also mean that you’re spending precious time and using your resources to try to get paid, which can distract you from the everyday running of your business.

So, instead of allowing your customers to run riot and not pay their invoices, you need to make it so easy for them to do so that they just couldn’t possibly not pay. Keep reading to find out how.

5 Ways to Make Your Customers Pay on Time (or early)!

These tips and tricks are steps and processes that we practice as well.

 

1.      Don’t make it harder to manage your customers and books than it needs to be

When you own and/or run a business, there is a lot of work that needs to happen. You have products or services to supply to your customers, you have staff members to manage, you have books to balance, and you have customers to keep happy.

As you can imagine, you spend a lot of time juggling these things. But there are tools you can use to make running your business a lot simpler and efficient.

Gone are the days when doing the books actually involved a literal book, but if you’re still using paper bills and books to track any processes in your business, it’s the time to stop.

Making your invoicing and bookkeeping electronic is going to save you time and make it a lot easier for you to keep track of everything. You save literal space in your business as well and are able to keep records for longer when they are made electronic.

Making your processes, like invoicing electronic also means there is no lag between you sending and your customer receiving their invoices, they have no excuse. And if you’re sending your invoices electronically, then you want to provide your customers with options to pay electronically as well.

 

2.       Give your customers a reason to pay you

Besides the fact that paying for a service or product is the standard practice in many civilisations, it doesn’t hurt to give your customers incentive to pay their bills.

The best way to do this is to offer an early settlement discount. What this means is that if they pay their bill before the due date, then they get a percentage discount off their total invoice.

This is pretty standard practice for large retailers and wholesalers, as well as electricity and utility companies. You could have one small standard discount, or you could offer a tiered discount system where they will receive a higher discount the earlier, they pay their invoice.

While you might think that you’re losing money, the reality is, you shouldn’t be giving a discount that you cannot afford, to start with. Secondly, the longer you wait to get paid, the slower your cash will flow – and there is no guarantee that your customer is going to pay when the due date arrives. So, if you don’t offer a discount and expect the full amount by the due date and it never arrives, you’re going to be worse off than a small discount but early payment might have left you.

 

3.      Give your customers a reason to never miss a bill again

You want your customers to take you seriously and pay their bills, right? Well, one way you can do this is by punishing them with late/penalty fees or charging interest on their invoice.

You can write these policies into your trading terms and conditions, so they know from the get-go.

Realistically, you don’t want to be so harsh and punish them with late fees the moment their invoice is overdue, as unfortunately human error does happen, and sometimes people simply forget things. You don’t want to ruin a customer relationship for the sake of a few dollars.

Use your penalty fees at your own discretion. If a customer has advised you that they will be late in making their payment, get them to give you a revised due date, and don’t charge them extra (unless this happens all the time). This will show them that while you are serious about being paid, you’re also an understanding person too.

Make sure you send invoices in a timely manner

4.      Invoice fast and electronically

Back in the day, when we were at the mercy of Australia Post for most of our communication needs, invoices would either be dropped off to our clients by us or sent in the post.

This meant that the payment period would often be elongated by the sheer fact of the slow pace of the post.

Well, today you don’t need to contend with this. If for some reason you’re still sending invoices in the mail, this is something you need to change. Invoicing your customers can be done almost immediately. Once you’ve provided your service or product, then invoice them. Do it by email and if possible, online too. Online invoicing is a great option when you have customer portals that they can log into. All they will need to do is log into their account and click a link to their bill.

Many online business systems allow you to set up most of your business processes so that they are processed online, meaning that invoicing in a natural and fast step in your process. It takes the thinking and procrastination of sending the invoice out of the equation and makes life a whole lot easier.

 

5.      Let the professional’s step in

An important part of being a business owner is to know when you’re out of your depth and wasting your own time. This includes when it comes to your customers paying their bills.

You probably think – your business, your problem. That’s certainly not the case. When it comes to collecting outstanding invoices and payments, this is literally the business of a debt collector.

While you might think debt collectors only need to intervene when your debtor has gone into hiding or owes you a whole lot of money, but that’s not always the case.

We’re not saying that for every bill that is a day or two outstanding you come running to us, but we are saying to know when we can help you.

It’s our job to help you make your debtors pay, and we do so efficiently and professionally. We work with you and your debtor to reach the best outcome. Our aim is to get you paid, because if you don’t get paid, neither do we.

Here at JMA, we’re professional debt collections for small and medium sized businesses. We work with all kinds of industries and do so all over Australia. We have debt collection agency offices in Melbourne, Sydney, and Brisbane, however, no matter where you are in Australia, we’ve got your back.

Debt collectors can help you keep your cash flowing properly. Call us today on 1300 664 223 to organise your debt collection.

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