Customer Rich, but Cash Poor? Four Ideas to Get Paid Faster
You land a flurry of new business and you are on top of the world. But 60 days later when ⅔ of it hasn’t been paid yet and your cash flow dries up? Being cash poor doesn’t feel so great. The good news is that you don’t have to have cash flow problems. You can get paid faster, which will bring your company more stability and help you sleep at night.
Four Ideas to Get Paid Faster
Whether you run a dental clinic, own a restaurant, or any other kind of business, here are four ideas to help you get paid faster and prevent you from being customer rich but cash poor.1) Communicate with your customer
Have a conversation about payment terms and expectations BEFORE you start doing work. This sets the stage for a win-win situation for both you and the customer. Of course, these terms should be included in your contracts for your clients to sign. But it's also worth mentioning them during a discussion too. If your client isn't one for reading terms and conditions closely, this makes sure they actually hear and understand your payment terms. It also opens up the floor for them to ask any questions on the subject. Not to mention, you're setting the stage for great communication down the road!2) Require upfront payment
Depending on the scope of the work and the project, require 25-50% upfront for work to get started. Since we get paid monthly by our clients, one of the things we do in our business is that after a contract is signed the first month’s payment is due. We get paid for the work we are doing, instead of invoicing for work we’ve already done. Looking for even more information about how to get paid faster and improve your invoicing? Read this next: 4 Really Good Tips For Effective Invoicing for Small Businesses.3) Use technology
- Send your invoices via email, they will get there sooner (without postage fees) and most accounting systems can do this automatically. The sooner the customer receives them, the sooner they pay.
- Accept credit cards. While you’ll pay a fee of around 2.9%, it’s convenient for your customers and will get you paid much faster.
- Set-up automatic bank drafts. An ACH transfer (automated clearing house) can be set-up to transfer a certain amount of money on a certain day. This just means using a computer-based electronic network for processing transactions between financial institutions–that's how direct deposits work! If you have long term contracts that don’t fluctuate month-to-month, this is your best option. You will get paid automatically each month straight to your bank account, keeping your cash flowing and your customers won’t have to process invoices or checks.
4) Use incentives and penalties to get paid faster
Some businesses choose to offer incentives for making payments EARLY (not just on time). Others charge interest on late payments, and some businesses use both of these techniques. For example, you can tell your clients they will receive 5% off their bill if it's paid at least three days before the due date. Depending on the scope of your business, this 5% discount might be worth speeding up your cash flow! Charging interest for late payments is an even more commonly used tactic to get paid faster. No one wants to pay more than they have to. When your clients know there are financial consequences to their late payments, they're far more likely to make their payments faster.Final Thoughts
No matter what you do or what industry you work in, you can get paid faster. Cash is the lifeblood of your business, keep it coming in faster and you’ll find that you sleep better, smile more, and enjoy life. So, try these four ideas if you want to avoid being cash poor but customer rich, and watch your customer AND cash flow improve. And if you want to talk more about how to get paid faster and improve the cash flow at your business, we have plenty more tricks up our sleeves! Contact us to learn more about our bookkeeping and CFO advisory services today. We'll make your life and your business run much more easily by keeping up with due dates, amounts, late payments, and so much more.Did you learn a lot about how to get paid faster in this post?
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