If your bank account is constantly short on cash’ then read on because I am going to help you eliminate those “feast or famine” cycles that afflict far too many businesses by helping you reduce your CASH GAP.
While thinking about the simple strategies below, remember if you don’t ASK, you don’t GET!
There are three critical yet simple steps you need to take…
- Establish Shorter Terms with Your Customers. When you’re negotiating contracts with your customers, collect as much cash up-front as possible, and then reduce payment terms. Even if you cut terms by just a few days per contract, you’ll be amazed at how quickly those days add up across your entire business.
- Get Customers to Pay You Faster. If you’re like most businesses, you have too many customers who owe you too much money at any given point in time! Don’t settle for late payments and outstanding balances. Collect more money, faster, by implementing the following principles…
- Collect payments automatically. If possible, take an automatic draw by standing order or debit/credit card each month or over the term of the contract or order if they agree to this sort of arrangement. Always automate when you can! Automation = saved time.
- Implement a systematized collections procedure. You need three letters or emails to enforce your contracts and encourage prompt payment: first is a “friendly” payment reminder that should go out when the client is one day past due. Next is a “formal” reminder sent when the client is one week past due. Finally, send a “harsh” reminder when the client is 14 days past due.
- Thank customers when they pay on time. Positive reinforcement goes a long way! When a client sends a prompt payment, THANK THEM. Simple, right? Not only does this remind them that you’re on top of the situation…but it makes them feel good to be acknowledged and appreciated. And you just differentiated your company and its image from 99.9% of your competition! And it didn’t cost you a penny!
- Negotiate More Favourable Terms with Suppliers/Vendors. This is NOT about cutting your suppliers’ margins – but is instead about creating real win/win relationships. Make a list of your most important suppliers and pick up the phone. Ask them to lengthen their terms. The longer you’ve been doing business together, the more likely they’ll be to work with you. If necessary, have a list of backup suppliers to whom you can turn if your negotiations prove fruitless. My clients often say, “My vendors won’t give me additional days for payment terms.” Well, I bet your customers ask. If you don’t at least ASK, you definitely don’t GET!
Your call to action is to make a list of the specific improvements you want to implement in each of the three steps above – and then take fast action! If you’re not sure where to start, reach out to me. I’ll be happy to walk you through the entire process.
I’ve helped many clients turn around their cash situation – often quite quickly – through a better understanding of cash flows, gaps and controls.
If you’d like some support to resolve money challenges in your business, I invite you to book a 15-minute call to discuss business coaching.
You can book a complimentary 15-minute call with me at timewithshane.com.