5 Ways to Become an Architect of Growth - BQE Software
5 Ways to Get Paid 5 Times Faster
5 Ways to Get Paid 5 Times Faster - BQE Software
Whether you bill weekly, monthly or as needed, most businesses work on 30-day terms. When you look at your receivables, though, and add in the collection period, those terms end up looking more like 45 days. And for small businesses especially, 45 days can seem like an eternity.
But imagine if you could get that money five times faster! Think of how much healthier that could make your cash flow.
If you take some simple steps to alter the way you handle your receivables, you can do just that—get paid in nine days … or even less. Here’s how:
- Accept Credit Cards
I’m shocked by the large number of businesses that still don’t accept credit cards and rely on snail mail and old-fashioned paper checks. Given the fact that you can turn any smartphone, iPad or tablet into a credit card reader, there’s really no excuse for not changing your ways.
You’ll typically pay a small percentage—roughly 3 percent of the transaction total—but you get paid instantly. Then once you’ve set up your system, you can ask repeat clients if you can keep their number on file and offer them the convenience of billing them for their future sales as they occur. Making it easier for your clients to shop with you makes perfect sense. You can go from 45 days out to 0 days out right away. To learn how easy it is to process credit card payments in BillQuick, please read this article.
- Offer Bank Financing.
This technique requires some legwork on the front end, but if you can partner with a lender ahead of time and offer free financing to your clients, you’re providing a valuable service. More important, when you put your customers in touch with a financial institution for financing, you’ll get your money upfront and leave the collections to the bank.
The bank will typically charge you a fee, but the customer can get low- or no-cost financing, and you have zero collection responsibilities. Especially for high-dollar purchases, you want to remove any barriers that might prevent your clients from saying yes.
- Change Your Terms.
This one's so simple but so uncommon. There’s really no reason to default to 30-day terms if that doesn’t make sense for your business. If you institute new terms for all new clients, say COD or Net 10, you’re speeding the payment process up considerably.
While it’s harder to get existing clients to change their ways, you can phase in a change for those clients as well, as long as you give them sufficient notice. There’s no reason you should be a slave to tradition—make your terms work for you. BillQuick allows you to change your terms and simplify billing at the Global, Client and Project level.
- Change Your Billing Frequency
If you provide a service on the first of the month and wait to bill until the 30th, you’re slowing your cash flow down. Alter your systems to bill as services are rendered, and you’ll see your money much quicker. As Shafat mentions in this article, changing your billing frequency to bi-weekly or bi-monthly will dramatically boost your business cash flow.
A note here: This technique doesn’t work if you bill for small amounts that accrue over the course of a month. In that instance, you’re better off billing less frequently.
- Build a Reverse Cash Flow Model
The traditional model has been to provide a product or a service and then wait for the customer to pay you according to your terms. As an example, let’s look at the way we used to buy computers: Compaq or Packard Bell would front all the money to build their machines and then ship them to stores, where the inventory would sit and wait until a customer was ready to part with some money at long last.
Then along came Dell, and they revolutionized the market. Instead of putting machines in stores, they allowed shoppers to “customize” their computers and pay for them, and only then would Dell ship them. Money first, then product. Customers felt good (about selecting from the rather limited customization options) and didn’t realize they were turning the traditional payment model on its head.
You can turn the billing process around for your business as well by offering prepayment or monthly billing plans that buy clients repeated service or future shipments. There is a retainer management feature in BillQuick that lets you do just that before offering any services. Breaking free of your preconceptions about how your product needs to be billed can allow you to make billing work for your business, rather than becoming a hassle that makes it hard for you to make ends meet.
While I would never advise you to ignore every piece of traditional wisdom there is about running a business, I suggest you examine your business practices—like your billing policies—to be sure they make good financial sense for you. Sometimes a change in policy makes sense and improves your company’s fiscal health. For more information on how to bill faster and easier, please read this article.
This article was originally published by Mike Michalowicz in the American Express Open forum.