How Cash Flow Forecasts Can Help to Get Your Customers To Pay FasterIan McManus
First, let’s take a look at your cash flow forecast. Cash flow forecasts are like a calculated guess. It may or may not actualize. However, it’s important that you have a cash flow forecast as it will help you “see” how your business will fare through the next 3 months, 6 months, or the next year.
Many businesses fail because of poor cash flow. In fact it’s responsible for most business failures. You need a solid cash flow into your business to prevent this from happening. You also need to plan. A forecast is a perfect plan to ensure you have cash flow in your business.
Here are the benefits of developing cash flow forecasts:
- You can outline whether the business plan has actualized as predicted
- You can identify any problems early. It will also give you time to make a contingency plan.
- You can highlight predicted or expected business down-turns to allocate extra financial help.
- It can provide you with a useful way of anticipating downturns in your business’ cash balance.
Collect your money faster. The quicker you get it, the better. Money that is not in your bank account is not going to do you any good!
Here are three ways to collect your money faster
- Collect a partial or an advance payment
Many businesses have been doing this for years as this option works best for them. It can be the same for yours too. A perfect example is the cinema. Have you heard of people paying after they have watched a movie? Nope, you have to pay first to get in the door, why not adopt this payment method too?
You may have to develop a comprehensive plan on how to collect the payment before you ship/ or provide the service. Plan carefully as this will ensure positive cash flow.
- Collect on delivery or upon completion
You can collect on delivery or right upon completion of a service. Don’t be shy about it. You have given your merchandise/ service and now you should get paid!
And don’t wait for weeks, or months before you get paid. The longer it stays in your customer’s bank account, the less likely you’ll ever get paid at all. Therefore, ask (graciously) that you be paid.
You will find that most customers are happy to pay for products or services on delivery or completion.
- Offer credit terms
Many business offer credit terms, but first, you have to ensure you can afford it.
If you do offer credit, make sure you are paid within the month. You may be paying interest for the money that is not yet paid. Meanwhile, your customer is saving the interest! Isn’t that unfair?
Plus, your business can suffer while you wait to get paid.
Look at your cash flow forecast again. Did your forecast materialise as predicted? If it has, it was because you and the rest of those who work for you did a good job of collecting what is yours.