Tips to Keep Cash Flowing

By Vince DiCecco
September 29, 2015
THE TALK... | Operations

Cash is your company’s lifeblood. Without it, the business cannot function and grow properly. While sales are important, cash is still king. Failure to have a system to effectuate collections is a plan for eventual failure.

The first step is to put some past-due prevention measures in place. Some proven strategies are to develop a credit approval process for new clients, collect a 50 percent deposit on all orders, and/or maintain an Accounts Receivables Aging Report to track the payment status of all of your customers.

After efforts to prevent past-due accounts, the next step is to accept the fact that some customers are slow payers and will take as much latitude as they perceive you will allow. Studies reveal that the likelihood of collecting receivables drops significantly as time goes on—from more than 90 percent after 30 days past-due to 74 percent after 90 days, and to just 50 percent after six months.

So, don’t put off a collection attempt with the hope that a check will miraculously arrive in the mail. Build into your system no more than two business days grace period and never wait more than three days past the due date to contact the customer. The method by which you contact the client is your call, but phone contact is proven to work best. A friendly email reminder may work, but keep in mind that only about 25 to 30 percent of emails ever get opened.

Also, not everyone’s recordkeeping and bill paying systems are as organized as yours. Sometimes customers really do lose track of invoices and time, so be professional and polite when making that call or sending that email. Be firm but don’t lose your cool.

Create a script from effective calls you’ve made in the past and/or have templates for any written communications. This practice helps to ensure consistency—a methodology you can train others in your company to use—and saves time.

Having to ask good people to “pay up” is frustrating, time-consuming and uncomfortable. While collection efforts are not the most enjoyable function of running a healthy business, they are one of the most important. Implementing some of these practices will keep your customers out of collections and the cash flowing through your business.

How does your business make collections? Do you find yourself chasing the money more often than not? Read the results of this week’s poll, post a comment to share your experiences and/or email your thoughts on the subject.

Survey Results for 09/30/2015 :

In general, do most of your customers pay their invoice on time? How late are those that are late?

My company collects a deposit and insists on collecting payment the day products are installed.

  

 

35.90%

 

Most clients pay on or before their due date.

  

 

35.90%

 

Most clients avoid my calls and pay 30 or more days late.

  

 

12.82%

 

My company insists on collecting the entire payment before or on the day the service is rendered.

  

 

10.26%

 

Most clients wait until I call them to make a payment.

  

 

5.13%

 

Vince DiCecco is a business coach and owner of the Acworth, Georgia-based consultancy, Your Personal Business Trainer Inc., ypbt.com. He has been sculpting his sales, marketing and training techniques since 1979. 

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