3 Ways to Improve Your Cash Flow Today
But in order for the cash to keep flowing, your business needs an effective payment collection process in place. Without it, you’re often left waiting for customers to pay you at the same time your employees or bills need to be paid.
I know from personal experience the frustration that comes with waiting for payment for goods or services rendered. But I’ve also come up with a three-step solution! Here’s what I’ve learned works best when it comes to improving your small or midsize business’ payment collection process.
STEP #1: BEFORE THE SALE
As the least sexy stage of the payment collection process, before the sale is when a customer is interested in buying from you. This is where we, as business owners, need to do our homework. This entails
- researching five vendor references that have extended credit to the potential customer in the last six months,
- verifying the potential customer’s reputation with the local Better Business Bureau (including complaint investigations),
- checking online reviews of the potential customer (with special focus on submissions involving the customer’s work with vendors) and
- getting a credit check done on the potential customer (if applicable).
Ultimately, the sales cycle and the nature of your particular business will help determine if reference checks are necessary. If they are, they can slow down the sales process – possibly even resulting in the loss of a sale. But trust me: if potential customers are resistant to a reference check, they are not worth doing business with!
STEP #2: DURING THE SALE
The sale becomes underway when a customer has decided to purchase from you. During the sale is the most important part of the payment collection process and includes
- creating an agreement that is clear on all the terms of the work (particularly payment details),
- getting a legal professional to review your any agreement to ensure your payment is protected,
- collecting a deposit or initiating progress payments (if the delivery of your offering spans an extended timeframe),
- recording the purchase order number or project code for the work that you are doing and
- documenting the method of invoice delivery that’s acceptable by the potential customer.
Your agreement can be as simple as a signature on a quote or a more formal agreement such as a legal contract. If your business offers a service where cash is paid after the service is completed, ensure there is an agreement in place before the service is started.
STEP #3: AFTER THE SALE
Both parties agreed to the work at the beginning of the process and now it’s time for the exchange of money.
Occurring when you deliver your offering to the customer or when the payment term has ended, this final step can sometimes feel awkward – but it shouldn’t! To ensure you get paid, complete the following:
- deliver the invoice (noting the date, the purchase order number or project code and the agreement or quote number) as soon as the work is completed using the delivery method requested by the customer,
- set a reminder to follow up on the invoice a few days before it is due, when it is due and at a frequent internal after it is due,
- follow up with an email or phone call to see when payment should be expected and
- don’t wait for the invoice to be overdue 180 days before using a collection agency.
Once the work is done, getting the invoice to the right person with the correct information and approvals will get you paid faster.
During the payment collection process, don’t ever feel bad for asking for payment that your business is owed. Remember, getting paid for the work that you do is the whole reason you do business!
Need tailored advice on creating the right solutions to support your business or guidance on improving your business’ payment collection process? Contact us to make it easier for your business to get paid – starting today!