According to a recent survey by Wasp Barcode Technologies, worrying about accounts receivable is what keeps business owners awake at night.
Accounts receivables and cash flow are the two top accounting challenges facing small businesses. Sleep better with these proven techniques to bring in cash quickly.
Follow these tips to ensure steady cash flow
Ask for pre-payment
It’s not uncommon for suppliers to collect a sizeable deposit before starting a project, initiating a service or processing an order. Make it a policy to collect a percentage of an order before you begin your work (for example, 30% to 50%). Test the waters to see how much your customers are willing to pay in advance. Some business owners take it a step further and request full payment up front. Consider your business to set this payment level.
Don’t wait until the end of the month to invoice customers! It’s also a good idea to email your clients a friendly payment reminder before their invoice is due. Here are three free and easy to use invoice templates.
Keep payment terms short
There’s no law that says you must wait 30 days to be paid. Let your customers know you expect to be paid within 7 to 14 days.
Incentivize with discounts
Offer your customers a reduced rate when they pay their invoices early. Highlight the reduced rate on your invoices and include the early payment deadline. Most early payment discounts are between 2% and 5% and apply only to payments received within 10 or 15 business days. Don’t forget to speak to your accountant or bookkeeper to see how much of an early payment discount you can afford to offer.
Get it in writing
To clarify expectations, ask your customers to sign a contract or approve an estimate that clearly outlines deliverables and payment details.
Don’t hesitate to take action. Hire a collection agency to deal with chronic late payers and non-paying customers.