All small-medium businesses may not have an accounting department but the accounts would be taken care of by the entrepreneurs themselves. Here the business owners would be in direct and close contact with their clients. As a business owner, it is necessary that you be friendly towards your clients. However, ensure that you are professional while sending them your monthly invoices and reminders in case of overdue payments. It is always better to avoid cash flow crunch if you want to run a successful business. Recently, the U.S Postal service had made the decision to close smaller post offices and eliminate next-day first-class mail service. This is likely to affect all small business owners who rely on traditional snail mail for their businesses. Let’s take a look at a few ways by which you can avoid a cash flow hiccup.
How to Get Paid on Time
- Be professional and schedule your monthly collection date – As a small business owner you have to have your trading terms conditions in place. You should also ensure that your clients and potential clients know about your terms and conditions. You can always give a grace period of 10 to 15 days. If they still have not honored their word, then do not hesitate to call them. However, show some amount of leniency whenever required. Discretion is necessary on a case by case basis.
- Charge in advance – Ask your clients to make an upfront payment whenever possible. See if you can give discounts or other incentives when they make an upfront payment.
- Give incentives for those who pay on time – You should think about offering discounts on invoices if the client pays you within five to ten days. For those clients whose invoices are several thousand dollars, it can mean a sizeable savings. This is one of the methods to improve cash flow.
- Penalize late payments – ‘Chase money as soon as an account falls behind’ says Veechi Curtis, author of Small Business for Dummies. Do not hesitate to call your client the moment you notice that an invoice is overdue. You can tell them politely that they will be charged with a small percentage on the overdue amount. This tactic may work if you have clients who consistently make late payments.
- Consider moving your business to the cloud – Thanks to technology, there’s such thing as online accounting; which is a panacea for all small businesses. When you run your business on the cloud, your accounts are always up-to-date and you can set reminders. You will be able to monitor your accounts at a glance from anywhere at anytime. There are many online invoicing applications where you can register for free with no hidden or monthly charges.
- Send your invoices out on the same date each month – If you invoice every month, it is a good idea to send the invoice to your clients on the same date of each month. This is a rhythmic reminder and it is in the subconscious mind of the client that your invoice will come on a particular date. If your business is dealing with products, send out the invoice along with the products and make a follow up towards the end of the month.
- Allow alternative payment options – If you are relying on physical checks for payment, it is high time you think about other options. Allow your clients to make electronic payments through credit cards or e-checks. The online invoicing software offers these payment features. These days, Paypal is the most popular and professional payment option out there. You will find this built-in most of the online invoicing software.
Cash is king and if there is a cash flow hiccup, it is unlikely that your business will survive. Therefore when you write up financial terms and conditions, ensure that you implement the same. If a client is not willing to pay on time, he is eroding your cash flow. It is always better to do away with such clients. Enlist a collection agency, only when things get out of hand.
Have you tried using online invoicing software to avoid cash crunch?
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