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Cash is the Lifeblood of Your Business - So Why do so Many Business Owners Neglect it?

If we could get our clients to do only one thing to improve their business results there is no doubt our advice would be to, "look after your cash". Here is an actual discussion we had recently with one of our business clients, lets call him Bill:

Us: "How's business?"

Client: "Good. But, we are really busy but just don't seem to have anything to show for it."

Us: "Why do you think that is?"

Client: "Times are tough. Our customers are just struggling with their own businesses and seem to be taking longer to pay us."

Us: "Ok. Lets have a look at your credit terms."

Client: "Our what?"

Us: "Do your customers understand your credit terms?"

Client: "Oh yeah, we tell them we expect payment in 7 days, but they are just struggling too."

Us: "7 days is good. What are your average debtor days?"

Client: "Our what?"

Us: "Ok. So what happens when a client is late on payment?"

Client: "I usually ring them and ask for them to pay. Most of the time they really want to pay but just don't have the money."

Us: "How often do your ring?"

Client: "Well, to be honest, I really hate ringing asking for money and am so busy at the moment I probably don't call as often as I should."

Us: "Ok. So if your terms are 7 days, do you ring at least once a week?"

Client: "Not usually. Probably once every couple."

Us: "That's not too bad. Once every couple of weeks, but breaching your own credit terms does sort of send a message to your clients that slow payment is ok don't you think?"

Client: "Once every couple of weeks! I meant once every couple of months."

This conversation actually happened. Put yourself in the position of Bill and ask yourself the questions we asked him. Are your answers similar? If so then you really need to book your FREE NO OBLIGATION APPOINTMENT to see our qualified Business Improvement Specialists. Phone 07 5439 1600 right now of CLICK HERE to book your 
FREE NO OBLIGATION APPOINTMENT right now.

Believe it or not, there are some simple effective ways to make sure your clients pay you. It doesn't have to become a problem if these steps are implemented and followed:

  1. Know who your are doing business with. Sounds simple but do credit checks before doing business. A bad customer you don't do business with is every bit as good for your business as the good one who pays on time every time.
  2. Formalise your trading terms - and stick to them. Keep your relationship with your customers professional and make sure they understand your payment terms before they do business with you. That way, it will not be a surprise when you follow through on unpaid accounts on time.
  3. Set up payment terms you control. Direct debits are cheap and effective using one of the many aggregation services available. Credit card authorities can be signed and provided as part of your trading terms. That way, you control when the customers pays and if you are doing a good job then there should be no further issues.
  4. Issue clear, timely invoices that support your payment expectations. This means keeping good records and use a proper accounting system to manage your debtors. Manual invoices, spreadsheets, and even some off the shelf accounting software may be costing you more than you actually realise!
  5. Particularly for our construction clients, variations can be problematic. There are many solutions available that will enable you to prepare a variation on site and have the client sign it thereby avoiding future disputes. You can even attach photo's to the variation or job file. These solutions are very cost effective - for more information Phone 07 5439 1600 right now of CLICK HERE to book your FREE NO OBLIGATION APPOINTMENT
  6. When payments are not made in full and on time be careful about continuing to provide services or products to your customer. Don't dig yourself a deeper hole.
  7. There may be specific legislation relating to your industry. Where this legislation provides you with additional security then use it. One example of this is the Building and Construction Industry Security of Payment Act. Don't know it? Ring us or make an appointment to have a FREE NO OBLIGATION CHAT.
  8. If you don't like or are simply not good at collecting customer payments then you should consider using an external collection service. The cost of this is usually much lower than cost of not collecting the payments and if your trading terms are properly prepared then the cost of the service can be added to the customer account.
  9. For larger payments and contracts consider financing the invoice. Again the costs of these types of services are relatively low and ensure you get payment immediately. These services are very suitable for growing businesses needing to "tool up" for larger projects.
  10. When all else fails, be prepared to refer the accounts to take legal action to recover your debt.

If you think your trading terms or your collection process needs some improvement then make the phone call. Phone 07 5439 1600 right now of CLICK HERE to book your 
FREE NO OBLIGATION APPOINTMENT right now.