You may have read my previous tip on improving cashflow in your small business, found here Better Cashflow # 1. I have another idea you can easily implement in your small business to help boost your bank account and have more money available when you need it.
It revolves around the following fact:
The sooner you contact an overdue customer, the more likely you are to get paid.
So improve your chances of being paid on time by having a collections policy.
A collections policy is basically deciding on the steps you are going to take when a customer hasn’t paid their invoice by the due date and putting those steps in writing.
- Invoice 1 week overdue. Send a friendly reminder by email
- Invoice 2 weeks overdue. Phone the customer. Discuss why overdue.
- Invoice 3 weeks overdue. Phone the customer. Discuss payment plan if needed.
You can still be flexible and use your judgement on a case by case basis. But overall you will lay down the framework for what action to take and when. You set aside time on a regular basis to sit down and work through outstanding invoices – you make it a priority.
An important part of your collections policy is to keep track of who you have contacted and when. This helps whether you have an in-house bookkeeper, outsource your bookkeeping or whether you are responsible for your own business accounts.
You will find that over time your customers will start to pay you sooner. If they need to decide what invoices get paid this week, you are more likely to be at the top of their list.
You are not being rude by following up outstanding invoices – you are simply a business owner running your business in a professional manner.
Have you run a report lately to see how much your customers owe you and how overdue those invoices are? How much more cash would be in your bank account helping to cover your own expenses if those customer had paid on time?