Cash flow is the most important metric that every business manager must monitor actively. Improving the cash flow by even 10% can result in over 50% increase in your annual profits. Here are 10 easy-to-implement tips that are guaranteed to improve your cash flow:
1: Sync your billing with the client’s bill payment cycle: Use an automatic billing system that can set custom billing dates such that they correlate with your client’s bill payment cycle. Sending invoices when clients are done with their vendor bill payments will unnecessarily delay your payments. Instead, ask your clients when they typically pay their vendor bills and then invoice them a week prior to that.
2: Minimize billing review delays: Set recurring appointments for managers or principals responsible for reviewing the pre-billing reports and/or draft invoices a few days before invoices need to go out. BQE’s research has shown that waiting for the decision makers to approve billing is the main culprit in delaying the process. Blocking time on their calendar ensures a timely turnaround.
3: Ask for retainers: When you sign up a new job, never start it without having the client pay a reasonable retainer. Based on the estimated average invoice value, bill the retainer to the client upfront and then apply this ‘advance payment’ to the final invoice. Not only does this improve your cash flow, it also reduces the risk of not getting paid for the services if the client disappears.
4: Accept credit cards: Provide flexible and incentive-based payment options to the clients. With miles, reward points and other goodies, you are likely to get paid faster by letting your clients use their credit cards for making payments. Read how to accept credit card payments online with BillQuick here.
5: Offer early pay discounts: Offer a discount, say 2%, to your clients if invoices are paid prior to the due date. Giving an early payment discount (no matter how small it is) provides an incentive to your clients to pay quickly. BQE has learned that many businesses have policies that require them to take advantage of discounts when offered by vendors for early payment.
6: Let your managers make the call: If invoices are past due, your project manager should be the one to call the clients directly. BQE has learned that getting collection calls from the project manager has a higher success rate for getting payments as compared to having your accounts receivable person make the call.
7: Automatic open invoice email: Schedule automatic emails to your clients reminding them about the unpaid invoices. BillQuick Agent has the ability to send statements automatically to the clients at a specified interval.
8: Include invoice backups: Eliminate excuses by proactively emailing invoices to your clients along with the necessary backup material. Attach the receipts for reimbursable expenses and other documents to the invoices before clients ask for missing details—the biggest excuse for delayed payments. BillQuick provides the ability to email invoices along with the related backup documents. Take advantage of this powerful feature.
9: Increase your late fee: Charging a late fee at a significantly higher rate is by far the most effective way of getting your clients to pay promptly. So if the late fee interest rate is 1.5% per month, I recommend increasing it to 5% per month. However, this must be clearly specified in the service agreement to avoid any issues later.
10: Send ‘Thank You’ email promptly: Set your Accounts Receivable system to send an automatic ‘Thank You’ email to your clients along with a payment receipt after receiving their payments. Not only will your client appreciate this service, you are more likely to get paid faster for your future invoices. BillQuick offers this incredibly effective Automatic Payment Receipt option.
About the Author: Shafat Qazi, Founder and CEO of BQE Software, is an engineer-turned-entrepreneur who created the most awarded time billing software ever, BillQuick, while still in college. He set out to make time tracking, billing and project management easier for engineers as well as all service professionals and continues to perfect BQE Software products hands-on today.