Has this ever happened to you? You are working on a project with a client. The project is running along nicely when suddenly something occurs that causes the client to question something you did or didn’t do. You immediately take care of the issue and move on.
The project ends and you send an invoice. The client calls you and says they aren’t going to pay the entire amount due. Suddenly that small incident that you thought you took care of becomes an issue and now you are wondering how you are going to get paid.
Another scenario that occurs far too often are business owners upfronting the costs to do business because they are hesitant to ask for deposits or mid-project payments. This can take a huge toll on your ability to have cash to fund your business.
This is when entrepreneurs and small businesses run into cash flow problems. Bad debt or extended payment schedules mean you end up covering any cash flow shortfalls personally. These are the times that try business owners souls – to piggy-back on a famous saying.
What could you have done in this situation to ensure that you got paid the full amount due? What can you do to make sure you aren’t acting as a ‘bank’ for your clients? How can you put a stop to cash flow crunches?
7 Essential Must-Do Billing and Collection Habits
- Put your agreements for service or product sales in writing.
- Make sure the agreements outline expectations on what you will deliver as well as what the client needs to deliver.
- Always go over payment terms up front with a client.
- Make sure you arrange to receive money upfront in order to cover any out of pocket expenses.
- Set milestones for deliverables and payments if you work with clients on a long-term basis.
- Set aside time each month to get your billing done.
- Have a conversation with your client and go over expectations and what value you delivered before you send the final invoice.
Your main goal as a business owner is to Grow, Protect and Save your cash. In addition to these 7 secrets, make sure you are on top of your receivables. Ask yourself: Have my receivables fallen into the 60 – 90 day payment range instead of 10 – 30 days? You might have to revisit your payment terms and add a surcharge on all receivables over 30 days old.
What do you do if you have a client that falls behind in paying you? Easy. Stop work! Tell them, nicely, that if they get their account current, you’ll be happy to move ahead with their project. A huge mistake we can make as business owners is to allow this situation to get way out of control.
The challenge of staying on top of the financial side of your business can take a backseat to all the other activities that demand your attention. However, your business requires cash so you have to put in place policies and procedures that ensure that your cash flow is taken care of.
Learn more about Managing Your Cash in Laurie’s online program Destination, Greatness: Your Financial Success System. Visit www.destination-greatness.com and learn about the foundational business concepts you have to understand in order to build and sustain a profitable business.