Cash flow, as the name suggests is about the movement of money in and out of your business. While your accountant may talk about a statement of cash flow which involves looking also at the balance of bank accounts, many of the cash problems a business faces stem from providing credit. Here are four tips you can easily implement using AccountRight to avoid the sleepless nights that many business owners face when worrying about having enough cash to run the business from day to day.
Be clear about your terms
Remember what happened the last time you asked for credit with a large supplier? In most cases you had to go through a four page application form and had to provide credit references, right? This process is less about the credit references and more about having a signed document that clearly states that you understand the supplier’s terms. Many small businesses will implement these application processes, but then in the rush of trying to engage new clients, forget to or simply don’t have time to maintain additional records.
AccountRight has templates to help you do this, simply click ‘Create Personalised Letters’ from the card file command centre, select the clients you want to send this application to and choose the ‘Credit Application’ template.
Commit to calling about overdue invoices
Often the hardest job has the highest payoff. Calling clients who have gone beyond your set terms is a difficult balancing act for a small business. In many cases you are wearing the Sales/Marketing hat, as well as that of the Finance Controller.
Remember that some businesses will have their own unwritten cash flow rules and may be just waiting for your call. I had an infrequent client once advise me (when I had found the time and courage to make calls the clients who were overdue) that they had “the last two digits of my bank account details mixed up”. Once I had called I was paid the next day. This occurred on my second invoice to them eight months later.
An easy way to start making the calls is to use the ‘To Do’ list in AccountRight to quickly see which clients are the most overdue.
Make the time to call clients the day after the payment was due, every time. If clients know that you will call the moment they don’t pay, they are more inclined to pay on time. After getting a commitment to pay, diarise and follow up exactly when you say you will. An MYOB training customer once shared with me his sure-fire method of receiving payment on overdue invoices. He would ensure he had the home phone number before giving credit and on the day they became overdue he would call them at 4pm. The day after he would check if the payment had come in, and if not he would call them at 5pm. 6pm next time if they still hadn’t paid. He told me he never had anyone go past 11pm because they could clearly see the pattern and didn’t want the 2am call.
Use a ‘contact log’ entry in AccountRight to record the nature of your conversations and set a recontact date and time should the payment not occur.
Be clear about the hat you are wearing when calling about an overdue invoice. Control the call and don’t get into discussions about past or future business. A good way to do this is to focus on when they will be able to pay you and work towards that commitment. Have all the information about the overdue invoice available and be ready for the common excuses.
MYOB’s MPowered invoices service give a range of payment options including credit card by internet or phone, BPay and Post Billpay.
All these things are easily said, but harder to implement. Remember that your AccountRight software has many other ways to help with these processes, and our Day to Day Processes course has more information on the best way to use these tools.