‘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.