Is your cashflow flowing?

Is your cashflow flowing?

‘Trouble is that my cash doesn’t so much flow as tinkle…’

Cashflow is a common problem, and not just among small businesses. Complaints about slow payment are frequent – so what can you do to encourage your clients to pay on time, and in full?

Well, you could begin by thinking of this as an issue with your business process rather than an issue with your clients…

Why your process could stop you getting paid…

Have you ever reviewed your accounting process?

When asked, it’s amazing how many people say ‘no’. And yet it’s one of the first things you should do if cashflow is important to you. (And if it isn’t, you probably don’t need to be in business!)

Taking it step by step:

  • When – and how – do you send an invoice?
  • What is your process for checking it has been sent – and received?
  • How can you be sure that the right person is receiving that invoice – i.e. someone who has the authority and ability to pay it?
  • How do you ensure that they fully understand what they are paying for?
  • How do you ensure that they know how to pay – and where they should send their payment?
  • How do you ensure that they understand your terms of payment?
  • What is your process for recording payments made?
  • How and when do you send payment reminders?
  • Do you send overdue notices? How and when?
  • How – and how quickly – do you respond when clients fail to pay?

I am constantly amazed at how many businesses have nothing in place for one or more of these critical steps. So amazed, in fact, that I’ve produced a beginner’s guide to avoiding payment.

It shows you exactly what not to do – and you can see it here…

But the invoice, of course, is just part of the process. You need to consider the whole process – in detail.

Ready for change…?

Ready for change…?

Is someone who struggles with change ‘resistant’ to it? Or are they simply not ready for change?

The difference is important, because ‘readiness for change’ is something you can gauge even before a change takes place.

By knowing how ready for change they are – and working to increase their readiness – you may never need to deal with ‘resistance’ at all.

Using the word ‘readiness’ also removes the rather judgemental associations of the word ‘resistance’. That will affect the attitudes and approach of the people who need to make change happen.

So – how can you determine someone’s readiness? (And let’s give the ‘someone’ a name – Hubert – to avoid complicated language. Apologies to anyone called Hubert, of course…)

There are two issues you need to think about:

  • The drivers: How bad does Hubert believe that things now? How much – in Hubert’s view – will change improve them?
  • The restraint: How secure does Hubert feel with things as they are?

Drivers for change

If Hubert’s unhappy then he’s far more likely to welcome change. And the more unhappy he is, the more willing he will be to try something new.

If Hubert is comfortable with things as they are it may be hard to persuade him to do things differently – let alone to do things that are different.

So – in essence – a successful change needs to be driven by at least a moderate level of dissatisfaction.

But it also needs to overcome…

Restraints on change

Good research suggests that Hubert’s own feelings of security may be a critical barrier to change. And (by definition) those feelings will be very difficult for anyone except Hubert to determine! That’s because we’re talking about subjective perception, not objective reality. So to truly understand Hubert’s position you’d need to be inside his head. And seeing the world exactly as he sees it.

This subject is tricky enough to deserve a post of its own. So, for the moment, let’s assume we have at least a rough idea about Hubert’s level of felt security.

What effect will this have on his readiness to accept change?

Suppose Hubert is feeling insecure at the moment. That means his anxiety levels are high, and he will be unwilling or even unable to cope with change.

If, on the other hand, he is feeling very secure then he won’t be interested in new information or new ideas.

Drivers and restraints – how they work together

That – as you can see – creates a fascinating picture.

Ready for change? That depends on an individual's feelings of satisfaction and security

The shaded area is where Hubert is fairly dissatisfied –  but also feels reasonably secure. This is when he’s most likely to accept change.

To the right – where he feels almost completely secure – the chances of that become far smaller. If he feels both secure and satisfied (bottom right) then he will obviously be quite happy with things as they are. And If he feels completely secure he will probably become a contented and complacent ‘fat cat’. Even the boxes above, on the right, will be sparsely populated. That’s because new information and new ideas have little appeal to people who feel secure.

The left-hand column poses a different problem. If Hubert is here, even the strongest arguments will fail to cut much ice – because he is incapable of change. The very thought of change will induce the kind of panic that makes a rabbit freeze in the face of oncoming headlights!

So how can we find out where, on this diagram, Hubert feels he is?

And, more importantly, how can we move him to a position where he can and will change?