17 Hot Tips To Increase Cash Flow NOW!
Whether in a tight economy with slow paying customers, in a growth mode, or just business as usually – we have all seen the situation where the P&L statement shows we are making a profit, BUT… there is no money in the bank!
“Profit is Theory and Cash is Reality!” ~ Verne Harnish.
17 Actions to Increase Cash Flow, NOW:
- First, stop saying, “Well, this is just the way it is in our industry.” We all know we tend to get what we expect. Have you created a “culture” (expectation) where your customers think, “It is OK to be a slow payer with <your company>? Don’t “compete yourself out of business” by offering the best terms.
- Have your available cash reported DAILY with a short explanation why it changed in the last 24 hours – and chart against Account Receivable (A/R) and Accounts Payable (A/P) weekly. You’ll learn so much more about your business when you see how the cash is flowing on a daily basis.
- Shorten your sales cycle. Maybe you need sales training or some different sales people (See People Decision).
- If you want paid sooner, ask, ask, ask! Assign the person with the most influence and strongest relationship with that customer to that account. This may oftentimes be the owner. This is the wrong area of your business to delegate (abdicate) to someone else unless they are better at it than you.
- Give value back for customers that pay in advance or on time. Discount for early payment.
- Get your bills out quicker – hire someone in accounting to do nothing but make sure invoices are timely and followed-up.
- Get your team to submit accurate work orders…how much billing time is wasted chasing down the right numbers because the paper work wasn’t right and submit it in a timely manner.
- Have a policy that the time from job completion to invoicing is no more than 3 days.
- Bill often –once per week. The time between billing cycle is consuming your cash.
- Understand why your clients are paying later – many times there are recurring mistakes on the invoice or the invoice is not structured to make it easy for your customer to reconcile. Don’t give you customer an excuse to not pay because your invoice is incorrect or unclear.
- Hot Tip: Email your invoice before you mail it. Have someone call your customer to see if they agree or have questions. Then, when the written invoice arrives, there shouldn’t be any excuse for a delay for clarification.
- Hot Tip: Use blue paper for your invoices – when you call about your invoice, “It’s the blue one…”
- Pay many of your own expenses with a credit card so you can play the float and get your own customers to pay by credit card.
- Get a bigger percentage before you start. Again…if you don’t ask, the answer is always no!
- Get the job finished. Shorten product and service delivery cycle times — get rid of the “work-in-progress.” Don’t leave loose ends that prevent you from billing.
- Of course, improving margins and profit can improve cash. Perhaps you need to revisit your marketing strategy, clearly identify your uncommon value (see Strategy) so that you are selling more than price.
- Follow-up, follow-up, follow-up. Oftentimes it is the accounting person who makes the decision as to who gets paid and when.
- Relationship, relationship, relationship. Treat them nice! Send thank you and birthday cards and small gifts…not just to the owner at Christmas .
- One final action – Sack you slow paying customers. If you want to “sack” a customer – but get paid before you do –send them a letter that says you are going to file a W-9 with the IRS if they do not pay by a certain date. Call me if you want to know more about this.
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