As a business owner, particularly at present, it can be very easy to just focus on the “doing”, but more and more there is a need to step back and keep a critical eye on your business and its cash flow. We’ve all heard the terms “turnover is vanity, profit is sanity, cash is reality”…and never has this been more true.
Sadly it is no longer enough to put together a quality tender, complete a great piece of work for a client, or ship an amazing product. If our eyes aren’t on our debt management then this may all just be a wasted effort if we are then not able to be paid for the work we have completed or for the product sold.
With many businesses, particularly online businesses and retail, this is not where the issues come – theirs are often in relation to the cash locked up in their stock. But for those businesses where the invoice is issued when work is complete or a product is delivered, the key part of the whole process starts here.
The key to unlocking this is to have a robust process in relation to your invoicing. For those that already have a good process, it’s time to look again as there is always room for improvement.
Before examining debt management, it is worth looking at the ways we can reduce our risk of not getting paid before we even get to the invoice part; ideas such as;
- Agreeing payment schedules upfront with customers, particularly those where your work may be completed over a period of time
- Agreeing points where invoices can be raised and the terms of the payments of these will help ensure that you don’t have to wait to the end of the project to start chasing a debt which may then be less likely to be received
- Where you complete annual work for a customer, agreeing a monthly payment schedule
- Event billing – just as it says really, when you complete a piece of an assignment then invoice this
If we are only able to invoice once and this is at the completion of an assignment then the key is to do this quickly. The amazing service you have given, the fabulous product you have sold will still be very much in the customers mind and the invoice is more likely to be settled without dispute. Sadly, the longer we leave the invoicing the less fresh this is in someone’s mind and the more likely someone is to dispute this or fall further down the pile as their own business or life will have moved on and more invoices or bills will have been received which require their attention.
So, invoicing quickly is the first thing.
Invoicing is fine, but if we aren’t then going to follow this up then it can be a pretty blunt tool when it comes to getting paid.
The second thing is therefore making sure you have a process – this is key but it’s only of any use if you follow it. If you have 30 day terms, then you need to make sure that you have a system in place where you are chasing this invoice just ahead of the payment date – “just a reminder that our invoice is due tomorrow”, a reminder just after and then a set schedule of reminders.
I can almost hear the sound of heads hitting desks – doing all of this on top of the day job is impossible, in fact if you do all of this manually you may not even have much time left to do the day job.
Don’t fear – there are many great systems out there to help you automate this – one of which is Chaser and this is something that many of our clients use.
Keep your cash coming in
Chaser is an app that integrates to Xero and within it you can set up your payment terms, your standard wording and then different payment and reminder periods. All of your customers can be included within here and you are still able to tailor the approach that you want to take – for some customers you may not want an automated service and may wish to handle these personally. That’s fine – just set these up for the reminders to come to you – this way they won’t be forgotten.
Whilst you are doing the day job, the system will work in the background sending various reminder emails on your behalf and will keep your cash coming in whilst you are doing more work, ready to invoice.
There will be some invoices that don’t get paid without some element of intervention but hopefully this will ensure that the vast majority don’t require your time, leaving you to ensure that you can spend the time on those that do need it.
Last of all, build in time to review your debtors on a regular basis – at least once a month – and if you aren’t one to make calls to chase for your cash then look to pass these over to agencies who are trained to do just that.
If you are struggling with your debt management system and would like to speak to one of our team, drop us a line.