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Need to get paid? You're not alone. Late customer payment problems are an ongoing challenge for many Canadian businesses. But your small business doesn't have to accept it - especially if late payments are impacting your liquidity.
The quicker your business gets paid, the greater the operating cash flow you have to work with.
Ottawa-based entrepreneur Leonard Lee - a legend of sorts with the success of his shop Lee Valley Tools - told CB Online that controlling cash flow is critical to success. While you can't control customers, you can control the measures you take to get payments you deserve.
These four fundamental tips might help you get paid faster - which could pave the way for positive cash flow.
1. Offer Discounts And Impose Fines To Encourage Timely Payments
You might get paid faster and improve liquidity if you offer customers incentives to pay early. Offering discounts for early payments might help you get the money you need to run your business up front.
Still, entrepreneurs should be careful of being too generous with discounts offered. Many companies offer a 3 percent discount for immediate payment, but consider offering a 1.5 percent discount for payments made within 10 days. You'll still get paid quickly and it costs less.
Also, using professional-looking invoices might be a good way to let customers know you're serious about getting paid. Intuit's QuickBooks can help you set up corporate invoicing to get clients to pay fast.
While clients are rewarded for fast payment, they should also be reprimanded for late payments. If your company has a policy of a 2 percent late fee, people will think twice before putting off payment to the last minute.
2. Accept Credit And Client Payment Practices Won't Be Your Problem
Accepting credit cards is not an exclusive right of retail stores. Encouraging clients to pay with a credit card might mean you get paid faster.
Instead of waiting 30 days - or longer - to receive cash or cheque payments, ask clients to pay with credit at the time of purchase. You can get paid as soon as the credit payment is processed. Intuit offers a Merchant Service that can help you process credit payments.
With credit, customers can still delay paying, but you're not the one waiting. Their payment practices become credit card companies' problems and won't affect your liquidity.
3. Deposit Cheques Immediately To Get Deserved Cash
Whether or not you ask consumers to pay by credit, you'll likely be dealing with a lot of cheques. But just because you receive a cheque from a consumer, it doesn't mean your company has gotten the cash it deserves.
Start getting in the habit of depositing cheques the day you receive them and find out about your bank's availability schedule. This way, you can include these funds when calculating cash flow almost right away.
4. Create A Watch List For Profitable Consumers
When you identify the people who are paying your company, it may pay off to direct your attention toward them. The consumers who are making you the most profitable, with on-time payments and major purchases, deserve your time.
Intuit's QuickBooks Pro and QuickBooks Premier keeps information about customer payments and purchases electronically and updates regularly. This software can tell you which customers are making sure you get paid, and that can tell you where you should focus your energy.
In addition to helping you get paid faster, figuring out who the late payers are might help your overall liquidity calculations. Intuit offers cash flow software that can help you manage funds, and you can consider clients' payment habits when setting up cash flow projections so you never find yourself unexpectedly short on funds.
Ready to manage your cash flow & grow your business?
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