Anytime your business does a job on invoice for goods or services you provide to customers and they take their time in paying you, they effectively have your money in their bank account.
How often have you been paying your bills and leave the suppliers who don’t hassle you to last? Let's face it it’s the squeaky wheel that gets oiled first, I know because I have done this myself.
It took time for me to truly learn this lesson because for the first few years of running my business I ran the books myself, because I was so busy being everything to my business I really dropped the ball and let customers get away with not paying on time.
Once I realised I couldn’t do all the tasks and employed someone to help me, I worked out how much money my business had sitting in other people’s bank accounts. Honestly, the amount shocked me.
So my accounts manager and myself put together a plan to retrain our clients and get the money flowing into our bank account a lot quicker.
We became the squeaky wheel, we followed a process and made sure we became first in line to be paid and not the supplier that is left last in the payment chain. At first, it took a lot of persistence to get clients to pay on time, we became wise to the ones who took their time, it became a weekly task to make sure they were followed up on.
I started to suspect that not all our clients were as flush with money as we thought and this gave us a heads up to not allow them to go over our 14 day payment terms. We had about six clients in this position and we gave them all six months to catch up on the old invoices and made sure any current ones were paid within our terms.
To start, this took a lot of time and effort, the accounts manager had to be tough and ruthless, but now these clients pay us within our terms. We have kept to our word and don’t let clients go over our terms anymore.
My husband Lindsey, got really upset with one client who was complaining to him that our accounts manager was on his back too much, his reply was if you paid on time I wouldn’t have to pay someone to be on your back.
It can seem ridiculous that we have to pay someone to make sure our clients pay us but that's the reality of business. Why can’t our clients just pay on time?! One thing I do know is that without our dedicated accounts manager looking after my business our cash flow would severely suffer.
We all know how important cash flow is, my dear dad used to always say to me ‘Nichola cash flow is king’.
Cash flow is the lifeblood of business so it’s important that your money is returned to your account as quickly and with as little effort from you as possible. If you don't have a person in your business dedicated to taking care of your cashflow, what steps can you take today to fill that role? And if you do have such a role already, do they have clear guidelines on when and how to follow up effectively with clients to protect your cashflow?