We’re talking about ways to increase your cash flow this week. Here’s an excerpt from our product, 58 Strategies for Creating Cashflow Quick, on how you can tweak your accounting practices to help you increase your take-home income.
One of the problems with a growing business is that as your business grows, your expenses grow, and, if you have inventory, that’s growing too. And often your accounts receivable grows. That means you have more cash flow going out and even though you might be making a ton of money, you have little cash flow coming in.
Idea #10: Bill in Advance. It’s much easier to collect money up front then it is afterwards. It might be a little harder with the first sale, because your customer doesn’t have an experience with you, but after that, you’ve actually got to question why they don’t pay you in advance.
The reason isn’t because of bookkeeping (one of the often-used excuses). It’s because they want to use you to float them some money. They want you to be their banker. And if that’s okay with you, then fine: but make sure you bill at a premium. There is a cost to carrying debt, especially in a tight credit market like now.
Idea #11: Give a Discount to Pay in Advance. Instead of charging a premium to carry, give a discount to pay in advance. Here’s an interesting thing I’ve found over the years. If you assess a late fee, the chances are you’re going to upset your client and never get the fee paid anyway. But offer a discount for early payment, on the other hand, and you’ve got a much better chance of being paid.
Idea #12: Make it Obvious! If your giving someone a discount to pay early, make sure they know about it. Put the discount terms on the bill in an easy-to-see place, in large, emphasized print.
I have one vendor who does a 25 discount if paid in 10 days, but it’s in very tiny print. It’s almost as if they don’t want me to see it. That’s pretty useless for my as their vendor. I will take the full time. If they want to give me a discount to encourage me to pay fast, make sure I know about it!
Idea #13: Bill Immediately After the Service is Finished. Don’t wait until your office can get a bill done. From a client’s perspective, the sense of immediacy – of needing your service – was when they contacted you to get things done. That diminishes as time goes by, so get paid as soon as possible after completion.
If your clients don’t like the idea of billing up front, how about compromising and asking for half the money up front, half upon completion of the service? That way you are a little better protected in the event the client’s circumstances change.
Idea #14: Put Your Efforts into Collecting A/R at the Beginning, Not the End, of the Cycle. It’s interesting to see how many people put their collection efforts into collecting 60 or 90 day accounts. You have the LEAST chance of collecting A/R the longer you wait. So, put your efforts into the place you’re most likely to get results. Statistics show that an invoice over 60 days has only a 70% chance of being collected in full. After 90 days the chance of collecting the invoice in full drops to 45 % and after 120 days, it falls to 20%.
Idea #15: Take Credit Cards. If you’re not currently taking credit cards, get set it up right away! There are so many options out there, you can find one for your business, no matter how large or small it may be. For example, PayPal offers a credit card processing service for $30 per month, plus a small percentage of the amount charged. QuickBooks offers something similar, meaning you can take payment right through your accounting software.
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