Given the turmoil of the past twelve months, the old adage “turnover is vanity, profit is sanity, cash is king” has never rung truer. Nothing closes a company quicker than a cash flow crisis, so here’s our top tips for sound money management.
Spell it out. Describe the product or service fully at the outset so the client understands, meaning less opportunity for any payment delaying queries.
A bird in the hand. If you’re in the service sector, ask for a percentage of the fee up front to give yourself some headroom; take the stance that you are ready to start if your client is ready to pay!
Split the difference. Consider splitting a large bill into a number of smaller invoices; a client with cash flow issues is more likely to perceive a large balance as a problem and therefore sit on it, whereas smaller more manageable amounts will be paid more quickly.
Highlight terms. Confirm terms upon engagement but also reiterate them on your voice so that the payment deadline is clear. Make clear any late payment action like interest and charges.
Invoice promptly. After a project is completed, it’s all too easy to forget to invoice, but a customer has no obligation to pay until the invoice is received. Don’t bill once a week or once a month, but as soon as possible.
Credit…where it’s due? If you’re offering a period in which to pay, use the phrase “Payment due within X days” as opposed to “Net 30” so that there can be no ambiguity over the timeframe.
Make it easy. Give the customer a range of payment options, and make sure bank details are very visible; offer direct debits if it suits your business model so that clients pay upfront on a set day of the month, meaning you can plan to make your own outgoing payments.
The early bird. Yes, you want to be paid in full for work you have undertaken, but if it comes to the cash being in your pocket rather than the client’s, then you may want to offer a discount for payment within X days.
Mind your manners. If the person paying the bill is not your immediate point of contact, then be sure to build a warm relationship with them too. Plus, research has shown that messages such as “thank you for your business” can increase the chances of your invoice being higher on the list of payables.
If all else fails. If your customer simply won’t settle up, your next best option is the Government’s “Money Claim Online” (MCOL) portal which offers a low cost route to take those who owe sums up to £100,000 to court without engaging legal representation.