As I have mentioned before cash flow is the most vital component of any successful business. The day that the cash dries up is the day your business folds. With many companies pushing credit as far as they can what can you do to minimise the effect on your business? Here are a few of my tips to consider:
1. Raise payment terms at the point of sale not at the bottom of the first invoice. It is a common misconception that this may mean you lose the sale. I would argue that only poor payers will be frightened off and you can do without those types of customer. So play to their integrity and explain that you operate on fair trading terms – you will be surprised at how many people will agree with you.
2. Where possible get payment in advance. I would suggest wording such as ” We never ask our good customers to subsidise the few customers who abuse credit terms by not paying on time. As a result we ask that payment is made when the work is started/goods are delivered etc
3. Offer huge settlement discounts! Take a tip from some of the major retailers. If your target price is £250 then price it at £350 and offer £100 off for payment within 7 days – it works.
4. People pay people they like. Just as the adage that people do business with people they like the same goes for payment. So be approachable, pleasant, deal face to face or phone not by letter, appeal to their fairness, thank people for payment and dont threaten unless you intend to follow it up!
5.Give prompt payers an “added extra”. Low cost giveaways such as an upgrade, next day delivery, extended warranty, discount on next order, priority etc
6.Payment is not just the job of the finance team. Use your whole team and exploit their contact with customers. Reward your team and make it into a fun team event.
7. Hold a prize draw. as an example put all prompt payers into a monthly draw with say a meal, champagne or vouchers for the winners. At £100 a month it costs £1200pa – good value for increased cash flow.
8. Ensure your systems are in place. So that you invoice promptly, chase when due and follow up promptly – you will be paid promptly!
9. Offer finance for your customers. Work with your bank and you may even make money out of it. Just think car dealers, golf clubs, electronic stores etc.
10. Be bold. Generally if you do not ask you do not get – so be bold and ask/insist on your terms. A sale is only a sale when you are paid – never forget that.