There is a saying that “profit is opinion but cash is fact”. Cash flow is the lifeblood of a business. A business can be profitable, but can at the same time have enormous cash flow problems, and this is often a primary reason for business failure.
Many business owners with cash flow problems devote a lot of energy to increasing sales but pay little attention to also being brutal on expenses and being smart about factors that have a negative impact on cash flow; such as wastage, inefficiencies, stock control and debtor control. Yes, we do know that driving top line and an abundance of sales is key to curbing cash flow problems, it’s just that we need to focus on all factors that contribute to cash flow problems.
The more time debtors take to pay, the greater the likelihood of having ongoing cash flow problems. The bottom line is that effective debtor control needs to be viewed as a fundamental business process.
Most business owners do not enjoy asking customers for money. This is because it has unpleasant connotations. If it is integrated into your customer relationship process and communicated to your customers on an on-going basis, this will increase the likelihood of regular prompt payments.
Key tips to getting the cash to flow:
- Have a sound personal relationship with the person who is responsible for paying the invoices.
- Provide an exceptional service to your customers. The more needed you are, the more priority you will receive when it comes to being paid promptly.
- Ensure that your invoices are 100% correct and that the person responsible for paying the invoice is 100% happy. A telephone call to verify this is important. At the same time you can build value to your relationship and respectfully request a payment date.
- Have the software, cloud solution, to manage your debtor age analysis regularly.
- Have specific routines and responsibilities for debtor control.
- Be assertive and disciplined in the activity of collecting money
- Remove the 30, 60, 90 days on your statements? If you don’t, you are building in an expectation of extended payment terms by signalling to your customers that it is OK not to pay immediately.
In conclusion, talk to your customers with transparency. Encourage them and ask them to meet your terms. Remember, you always pay those creditors that call and ask you the most, so be the one doing the asking. Don`t just wait to be paid. Those that don’t ask will be paid last.