Getting customers to pay on time is one of the biggest challenges for business owners and when the problem persists too long, it can ultimately shut down your business.
For any business, the amount of money flowing in or out is critical to its success. When money is tight, paying basic bills can get challenging. But when cash is plentiful, a business can invest in its future by expanding, buying new equipment, hiring key staff or retaining key staff by rewarding them further.
The NSBC is on the verge of a historical breakthrough in changing the way business pays small business, specifically government and the big business sector. Shortly, we will have a highly recognised process where Business South Africa will openly commit to paying SMEs on time – More to follow soon!
Here are a few simple methods you can adopt to keep the cash flowing in:
Invoicing must be an immediate action. The quicker you execute, the quicker you will be paid. Furthermore, if you delay the invoice, it indicates that you’re not in too much of a hurry to get paid. Business owners are often slow at getting their invoices out once they have completed their work for a customer. Remember that your client has no obligation to pay until they receive an invoice, so don’t wait.
Make payment terms crystal clear:
You need to communicate the deadline on your quotes and invoices clearly as well as in all your telephone and e-mail follow-ups.
Invoice smaller amounts than that big invoice:
It is a known fact that it is a “human thing” to dislike paying over money. So what we need to do is make it easier by splitting invoices, rather issue a few small invoices than that big one. This sometimes poses a problem, however if you can do it, it certainly works.
Make a personal connection with the ‘Money Team’:
The key success factor in growing top line is to build solid relationships with the decision makers. What we forget to do is build relationships with those in the business that pay the accounts. Get personal with the ‘Money Team’ and get them to pay you first.
Itemise every detail:
You need to itemise every item on the invoice and clearly state the unit cost of every item. Going backwards and forwards in correcting invoices is a big contributor to delayed payments.
Check that every invoice is accurate:
To elaborate further, ensure that all the correct details are on the invoice before sending the invoice out. Few customers will rush to query an invoice that doesn’t look right – they just won’t pay it.
Use the telephone to chase money:
Many experts in the field agree that making phone calls can be up to 80% more effective than emails and letters. Prioritise your cash collection and chase the oldest and largest debts first.
Always check whether a purchase order is required:
Many large organisations will not pay an invoice without a purchase order. They are also unlikely to call you and ask for one. Your invoice will simply sit on a desk, not be entered into the system, and not paid.
Make the payment process easy:
Offer a range of payment options to your customers and put your payment methods on all proposals, invoices and statements. For example, you might accept credit cards, debit cards, cash and EFTs. Different methods will suit different customers, so offer as many options as possible.
Thanks to Standard Bank and key industry experts for assisting in the research on what methods work to get cash in quickly.