Have great payment terms.
Whenever I do seminars, I often ask people what are the best payment terms out there – 90 days, 60 days, 30 days, 7 days, cash on delivery. The best payment terms are you are 100% paid before you have even started the work. Use this as your starting point for getting clients to pay you. (Quick secret – by giving a cast iron guarantee to customers you will decrease any unwillingness for them to part with their cash)
Make it as easy as possible for your customers to pay
If you are sending out invoices, write your payment terms and bank account details in BIG LETTERS. You don’t want your invoice to be left to the bottom of the pile because nobody knows how to pay you.
Don’t ask the sales people in your business to collect money
Sales people are friendly, happy people (mostly) who aren’t great at asking for money from the people they are selling to. Get a task-orientated member of your team to do it, they will not have the emotional connection that your sales person will (although make sure they are polite)
Systemise your collection process
Come up with a system either emails/phone-calls/letter writing that just churns out like a machine. Remember the red letter utility bills that said ‘you haven’t paid although if you have – sorry its crossed over in the mail’. These were great, just big printing machines printing out reminders. This is what you want in your business, no customer gets around the system – if they haven’t paid they receive another letter.
Review your cash flow and bank balance
DAILY With all the other pressures in the business – delivery, sales, marketing, cash can get lower down the pile. Looking at your bank balance daily will focus the mind like nothing else.
Consider direct debits
Direct debits have to be the best way of collecting cash from your customers. It does cost but will save time in chasing and is so so easy once set up. Once a customer has been set up direct debit you just need to invoice them, inform them that you will take the payment by direct debit on a certain date and then just take it.
If all else fails – outsource your credit control
Your cash flow will improve by implementing the first 6 but if you are struggling for people to use, outsourcing your credit control whilst it will cost can improve your cash.