Bill Promptly. Ever find yourself so busy building your business and making deadlines that you don’t get around to billing on a regular basis? You’re not alone. In a consulting business I once owned, I often got so busy that every once in a while I forgot to have the invoices sent out until I realized I wouldn’t have the money for the next payroll. Seems like a stupid mistake, but it’s something that happens.
If you don’t already have a system in place, start (or assign an employee to start) billing for projects on a regular basis. When taking on longer-term projects or clients, negotiate in advance for regular payments based on time or upon reaching milestones instead of allowing the amount due to build up until completion of a contract.
Create Incentives for Faster Payments. Small businesses can sometimes significantly cut the time spent waiting for payment by offering a discount for quick payment. I have used this technique when necessary and have also been asked by customers if I offered that type of discount.
Basically I offered discounts of 1% or 2% for payment within 10 days. It is good for your bottom line and good for the business’s cash flow, too. The real bonus is that the customer thinks you are doing them a favor whether they choose to make the early payment or not.
Avoid Slow Pay/No Pay Customers- The best way to avoid cash flow problems because of customers or businesses not paying you is to weed out those slow pays/no pays before they become clients. So if someone is about to become a significant client or customer, do your homework.
Ask for, and check out, credit references. Call other businesses that have had a relationship with the client. You might even pay for a credit check from an organization such as Experian or Dun & Bradstreet.
Consider Consolidating Your Loans. I know it’s often tough for small businesses to borrow money. It’s also surprising how some small businesses manage to get multiple loans.
If you have several loans related to your business, review the rates and terms on each one. You may be able to consolidate two or more loans into a lower-interest account and improve your cash flow.
Trim Your Inventory. If you can’t go to a “just-in-time” inventory management system like many manufacturers have adopted then how about “just-in-less-time”? Money spent on over stocked inventory is money that isn’t producing any interest or savings for you.
George Sierchio www.actionbusinesspartners.com