Cash is King, and cash flow is a river of Kings. Improve your cash flow, and you improve the overall health and sustainability of your business. Here are 4 ways to improve your cash flow in less than 30 days.
1. Review your accounts receivable aging
I am shocked at how often, when I take on a new client, I review this report with them, and I find that they are surprised by what they see. I would normally not include this tip in an article like this, because I would think it would be obvious, but it clearly isn’t. If you review your Accounts Receivable (A/R) aging report, and see negative numbers, that’s a problem. Of course, you want to follow-up on anyone who is 60 days or more past due. The A/R Aging report should be reviewed weekly, and a process should be created for following up. Mine is simple. Any invoices that are past due, are re-sent.
The problem with sending statements is that nine times out of ten, the client will ask for copies of the invoice. Simply re-sending the outstanding invoices is faster, more efficient, and more effective. Always send all outstanding invoices. If you only send the past due ones, those will be the only ones that get paid. As long as you are sending any outstanding invoices, send them all.
If the client doesn’t respond after a few attempts, I have a system for automating the sending of the invoices on a daily basis, until they pay.
It’s annoying, but that’s the idea. The first time I did this, and a client asked me to stop, I explained that there’s a really easy way to make it stop :)
2. Review your Statement of Cash Flows each month
Many of us do not understand this important financial statement. If you refer back to my last post, “If Cash is King, Cash Flow is a River of Kings” you will have a good start at what to look at, what to look for, and how to make a beginning at reviewing this report each month.
3. Give your customers a way to pay you online, and encourage them to do so
It has never been easier to get paid online. You can use PayPal, but some, maybe many people hate PayPal. I use QuickBooks Payments when I send invoices out of QuickBooks Online. This works REALLY well. I also use Woo Commerce, which is super easy to set up in any WordPress website.
The big objection is based on fees. Consider this. What is it costing you in time, and energy to pick up a check. Enter it into your accounting software. Prepare a deposit. Go to the bank. Deposit the money. And come back to your office?
With online payments, your payments are processed, and easily synced with your accounting software. The fees that you pay, probably pale in comparison to the efficiency lost in receiving checks. Also checks get lost. Electronic payments don’t.
4. Get paid upfront
When I was eventually tired of chasing people for money, I decided I needed to change this. At the time I was working with a lawyer, and I loved how his system worked. Get paid in advance. Then when you bill for services, you just take the money you’re owed. No delays, no chasing people, and confirming they got your invoice. No dealing with people’s BS.
At the time this was not as commonplace in the accounting industry as it is now. I made a decision. I was willing to let clients walk away over this. I could afford to. If they were serious about paying me to do the work, and they wanted the work done right away, then why shouldn’t they be willing to pay right away?
Most clients respected it when I asked for it. That in itself told me something about the clients. The ones who didn’t respect it, probably weren’t the clients I wanted.
Refer to the link in item 2 above for how to get paid up front. Get paid online, so they can pay right away. You don’t want to insist on this, and then tell the client they have to wait a week, until you get the check, and it clears.