No matter how successful your business, if you don’t have a positive cash flow you won’t be around for long.
And, no matter how great a customer may be, if they don’t pay their invoices on time, they are setting you up to fail. Here are five steps to enhance your cash flow.
5 Steps to Improve Your Cash Flow
1. Set a collection goal.
An aggressive, but attainable, goal is to collect half of your outstanding invoices within a month. If you set your mind to it, you can make this happen. And just imagine how great that influx of cash feel!
2. Call past due customers.
Begin by calling customers with larger outstanding balances and asking for payment in full. Even though they may not be able to pay the full balance, make that your starting point and then be prepared to offer a payment plan. A good backup to full payment is half the balance now and the other half within 30 days.
3. Stop shipping orders or providing services to customers who owe you money.
Either put new orders/services on hold or ship items COD. Don’t worry about losing sales; it isn’t a sale unless you get paid.
4. Consider restructuring your payment terms.
One way to collect quicker is by reworking your payment terms. If you’re currently offering net 45, change it to net 30. And then start calling on the 31st day.
5. Fire your slowest paying customers.
Every six months or so, analyze your account list to determine which ones are causing cash flow problems. Focus on collecting whatever you can from these customers within a month and then fire them. If they are not paying, they’re not customers, they’re charity cases.