As a business coach for women I always say if you are struggling with your cash flow, it is merely a symptom of something else that is occurring in your business.
There are 3 big factors that could be contributing to cruddy cash flow in your small business, and one of them is inconsistent billing/invoicing and no/poor follow up on late and delayed payments.
As a small business owner you are likely the chief cook and bottle washer as the saying goes. Meaning you are doing it all - at least for now. You get so busy doing the work, you run out of time, or more likely choose other activities over making sure your invoicing is done on the same day of the month.
I’m also betting that as a service based business you are reluctant to call on clients who are late to pay their bills. I know. You don’t want to be “pushy” or seem “desperate” for the money, even though you desperately need the money. I understand.
Here are the 3 things your clients are really thinking about your inconsistent billing and follow up on past due balances:
In a recent conversation with a multiple seven figure client we were discussing an opportunity in her business and I suggested she connect with her accounting firm (one of the top 15 in the country) for suggestions on the resource we were seeking.
She hesitated and said, “I’m not comfortable with following up with them.”
“Why,” I asked curiously.
“Well, I still haven’t received my bill for my 2016 tax prep,” she replied. “It makes me wonder about where else they are not following up on my business. For the amount of money I have spent with them, my expectation is personal service and I just haven’t been satisfied with the way they are responding to me, I wonder what I am really paying for. If they can’t even take my request(s) seriously to get my invoice, I wonder what else in my business are they not taking seriously.”
Me, “So you have been asking them for more than 90 days for your invoice and they haven’t sent it?”
Client, “Yep - 3 times to be exact.”
Me, “Time to find a new accounting firm.”
If you are finding your cash flow a little out of balance, here are 3 things you can do to get a handle on things:
Have a documented process. Saying you’ll do your billing on the 5th of the month is not a sustainable way to run your business. Have it documented. Pick your day of the week to do invoicing and schedule it on the calendar. Ideally you’ll have a bookkeeper doing this for you. But for now, if it’s you. Document your process and schedule invoicing.
Confirm receipt of the invoice. As part of your documented process. Send an automatic email 7 days after you send your invoices confirming you client received it. Things get lost and it provides an excellent opportunity to have a brief conversation on how satisfied your client is with the service you are providing.
Communicate. If a client is late on their payment, reach out in a friendly manner. Technology isn’t perfect, invoices can be lost, circumstances can happen. The sooner you get on it, the easier the conversation is. Have your AR process documented and communicate it clearly with new clients so they know your policy. Then stick to the policy.
The revenue you collect through your AR is the fuel to grow your company. Inconsistent and poor attention to this task significantly impact your ability to grow. A steady, documented and executed process sets your company up for consistent growth.
Feel like you are having the cash flow woes? Let’s have a complimentary quick chat to see if we can identify the culprit and get you back on the road to greater success.