Business Cash Flow Tip – How to Collect Your Money FasterIan McManus
Learn How to Collect Your Money Faster All businesses need money. It’s needed to pay your workforce, buy equipment, stock your shelves, buy raw materials, etc…
If a business has too little money to work with, it’s going to have a difficult time staying afloat. And if there’s no money – well, it’s going to collapse. It is also good to know your company’s business cash flow.
All – well, almost all – of your money comes into your bank account by way of your customers. After you have sold your goods, or upon completion of a job you have provided, the next thing to do is to collect the payment.
What is your technique of collecting payment currently? Do you collect right away? If you do that, that’s great! Not allowing your payment to sit uncollected for some time will help your business stay afloat and keep advancing.
There are three methods of collecting money faster. These are: offering credit; collecting a full or partial payment in advance; and collecting on delivery or upon completion of a job.
- Offering credit
Start by planning first. Can you afford to offer credit terms? If you can, go right ahead and offer it. However, be careful that you don’t allow a payment to remain outstanding for more than a month after purchase, delivery or completion. The longer you allow a debt to sit unpaid, the harder it is to collect.
If you really want to offer credit, ensure you make it clear to your customers that payments must be made within the month after delivery of the goods or completion of the job. Remember, you are paying the interest on the money that you still don’t have while your customer is saving the interest. That’s not fair, is it?!!
- Collecting a full or partial payment in advance
Collecting money in advance is not something that everyone feels comfortable doing. You have to be positive, firm and polite. It’s quite a common method in many businesses. Many tradesmen will not start work on your job until they have received a ‘down payment’. If you purchase an item off the internet, you have to pay in advance before it is shipped. You’ll be surprised that most of your customers won’t even bat an eye when you ask for full or partial payment up front.
This method of collecting payment works well in many businesses and it can work for yours too.
There are some customers who feel uncomfortable about paying upfront. If you value your customer, take that into consideration and try the following method of collecting payment. It works just as well.
- Cash on Delivery or Upon Completion
Have you ever heard of someone taking the groceries out of the supermarket without paying at the checkout first? No, neither have I!
But, many businesses have been doing this style of collecting for many years and very successfully. You can do the same too. Many of your customers will be quite happy to pay on delivery or completion.
As a customer ourselves, we understand that it’s important to pay for the items we buy, or for the services we hire. When the roles switch and we become business owners, how come we feel collecting money promptly isn’t as important? Sometimes we undervalue cash flow and that’s not good for our business’ survival.