Any growing business is of course keen to grow sales. But improving your receivables is about more than just boosting the volume of cash into the business, it’s also about a focus on improving the speed of payments.
From the best customers to the worst, there are a range of things that you can do to support your customers paying on time – or even early. Here is part three of our five part series on managing your cash flow. Get paid faster!
1. Automate as much as you can.
One of the most important things to focus on with your invoicing process is ensuring that it is timely and consistent. The best way to make sure that you invoice on time every time is to automate the process. If this isn’t possible, or isn’t your preferred path, then make sure that someone in your business is responsible for invoicing and considering the impact of invoices due and overdue on the company’s cash flow.
A side benefit of automation – or a rigid timeline around your invoicing – is that your customer will understand your expectations in terms of when you will invoice for payment and when payment will be made. It’s much harder to tie a client to a specific payment date if you don’t issue your invoices in a prompt, timely manner.
2. Get on the same page.
Making sure that you and your client both understand and agree on your payment terms is fundamental to ensuring your invoices get paid faster. When you begin your relationship you should set down in writing how everything is going to work and get written agreement. This is the time to air any concerns around payment timelines or invoicing processes. Get written agreement so that everyone knows when the cash should be flowing in your direction.
3. Reward the behaviour you’re looking for.
You can start the cash flowing into your bank account by introducing deposit payments when your customers place their orders. This can be an effective way of managing upfront material or equipment costs.
If you want to incentivise on-time payment of invoices, why not introduce early payment incentives? Rather than penalising your customers with late payment penalties, an early payment incentive is a great way of recognising the right behaviour. It’s also supportive of the relationships you want to build with your client, and makes it easier to pick up the phone and remind them that their bill is due.
4. Keep your end of the deal.
If you want your clients to pay on time then it’s important that you meet your own deadlines in the invoicing process. By getting your invoices out on time you give your clients the information they need from you to be able to meet your payment dates.
From the start of the relationship until the invoice has been paid, keeping the lines of communication open will go a long way to support timely payment of invoices. Take into consideration the processes your client has internally to make the money available and make your contact appropriate to that timeframe. Making contact in advance of a payment due date will result in a more positive conversation than calling to actively chase payment. Use internal systems like early payment incentives as an opportunity to make contact.
When you are tightly managing your cashflow it’s important to know that you have the right systems in place to support payments being made on time. If you can make your processes regular and efficient then it sets a standard for the way that you would like your customers to manage the payment process. Most importantly don’t forget to create open lines of communication and take the time to use them.
Introducing Fifo Capital
Fifo Capital specialise in providing alternative finance solutions to small and medium sized businesses. If you’re looking for great customer service combined with a smart product that will boost your cash flow – contact us here today.