You know what they say: Cash is king. Improve your cash flow and you improve the overall health and sustainability of your business. Here are 4 ways to ameliorate your cash flow in less than 30 days.
1. Review Your Accounts Receivable Aging
I am shocked at how often a new client is surprised by what they see when I go through this report with them. I would normally not include this tip in an article like this, because I would think it would be obvious, but it clearly isn’t. If you review your accounts receivable (A/R) aging report and see negative numbers, that’s a problem. Of course, you want to follow up on anyone who is 60 days or more past due. The A/R aging report should be reviewed weekly and a process should be created for following up. Mine is simple. Any invoices that are past due are re-sent.
The problem with sending statements is that nine times out of ten, the client will ask for copies of the invoice. Simply re-sending the outstanding invoices is faster, more efficient, and more effective. Always send all outstanding invoices. If you only send the past due ones, those will be the only ones that get paid. As long as you are sending any outstanding invoices, send them all.
If the client doesn’t respond after a few attempts, I have a system for automating the sending of the invoices on a daily basis until they pay.
It’s annoying, but that’s the idea. The first time I did this and a client asked me to stop, I explained that there’s a really easy way to make it stop :)
2. Review Your Statement of Cash Flows Each Month
Many of us do not understand this important financial statement. If you refer back to my post, “If Cash is King, Cash Flow is a River of Kings” you will have a good start at what to look at, what to look for, and how to start reviewing this report each month.
3. Give Your Customers a Way to Pay Online
It has never been easier to get paid online. There are tons of options–PayPal, Woo Commerce, the list goes on.
The big objection to receiving online payments is based on the processing fees. Consider this. What is it costing you in time and energy to pick up a check? You have to enter it into your accounting software. Prepare a deposit. Go to the bank. Deposit the money. And come back to your office?
With online payments, your payments are processed and easily synced with your accounting software. The fees that you pay probably pale in comparison to the efficiency lost in receiving checks. Also checks get lost. Electronic payments don’t.
4. Get Paid Upfront
When I was eventually tired of chasing people for money, I decided I needed to change this. At the time I was working with a lawyer and I loved his system: Get paid in advance. Then when you bill for services, you just take the money you’re owed. No delays and no chasing people to confirm they got your invoice. No dealing with people’s BS.
At the time, this was not as commonplace in the accounting industry as it is now. I made a decision. I was willing to let clients walk away over this. I could afford to. If they were serious about paying me to do the work, and they wanted the work done right away, then why shouldn’t they be willing to pay right away?
Most clients respected it when I asked for it. That in itself told me something about the clients. The ones who didn’t respect it probably weren’t the clients I wanted.