Managing cash flow is one of the major problems and challenges facing small business in Australia. It is not just a matter of providing the goods or services you offer to customers, this can be the easy part. Getting paid, and getting paid on time can be another issue altogether!
So what can you do to get paid faster in 2016? Here are a few tips.
1.Ensure your trading terms are clearly defined
You need to ensure that the customer is fully aware of when payment is due. Dont give them the excuse of not knowing when they have to pay. You should also make the customer aware they will be liable for any fees incurred in chasing debts. Unless these terms are explained upfront, your ability to collect debt collection fees are reduced.
In Australia the average payment of accounts is 14 days after the due date. If your aim is to be paid in 30 days, make sure your trading terms are under 16 days.
2.Ask for a Deposit
Depending on the value of the goods or service you offer, it may be worthwhile to ask for a deposit. Receiving a deposit greatly reduces your risk of cash flow pressures. The balance of any amounts payable should be paid in line with your trading terms.
3.Give a Discount for paying early
Offer a discount if your customer pays before the work is done or the goods are provided. The customer will be happy as they are saving money. You will be surprised by the effect on your cash flow if you get paid upfront.
4.Ensure Invoices go out on time
An invoice should be sent to your customer as soon as the work is completed or the goods are provided. If you wait and invoice in say 1-2 weeks later, then you are already 1-2 weeks behind getting paid. The customer would also prefer to receive the invoice earlier as it allows them to associate with the goods or services provided.
5.Automate your overdue payment process
As a business owner you don’t want to get stuck every month sorting through overdue accounts. Ensure you have a process so at the start of each month, reminders are sent out to all overdue accounts, without exception. This could be via email, text message or mail.
One final tip. Customers are more likely to respond to a text to their phone than they are to an email. Statistics show that they are six times more likely to respond to text.
May your cash flow be positive. #loveyourbusiness