Five Helpful Tips on Increasing Your Cash by Managing Receivables

By Action Coach Dave Beam

Today I want to put some more cash into your business.  It is simple and essential for an ongoing healthy cash flow.  You must choose to manage your receivables.  Here are 5 tips to improve the management of receivables:

TIP #1: Create a system to receive payment for goods and services as close to the time of delivery as possible.

Some businesses are a completely cash business.  They collect their money at the time of service.  That is a good thing.  I encourage you to work towards this model as much as possible.  Create your system of payment for services and/or goods to be a close to the time of delivery as possible.  In fact, ask yourself this question “How could I get my customer to pay for goods and services in advance?”  Incentives for pre-paying or paying when goods and services are delivered are a wonderful way to address this business challenge.

TIP#2:  Remove all messages and communication that encourage slow paying

If you invoice for services, remove the “over 30, over 60, over 90 day” status from the invoice.  All this does is subtly tell your customers that they can hold your money for 90 days or more before it even becomes an issue. 

TIP #3:  Only offer terms that you are completely happy with

The best time to address receivables is at the point of sale.  It is your responsibility to work with your customer to create a win:win agreement.  Clear positioning and great open communication concerning payment terms is essential.  You also need to have a system that determines if your customer can truly afford your service and pay you.  Unfortunately, many people today purchase beyond their means.  This leads to problems for them and for you.  Take responsibility by creating a system that qualifies your customer and prevents these problems.

TIP #4:  Be proactive and quick to address slow payment issues

Customers appreciate it if you work with them when they are having a hard time paying you.  Don’t put off addressing a late payment.  The longer it goes, the more difficult it becomes.  If you catch a problem early, you have more options to work out a solution.  Do not hesitate to call a customer when they owe you money and have not honored their agreement.  You are not harassing them.  You are helping them meet an obligation and find a solution.  That should be your attitude, scripting, and approach.

TIP #5:  Create a system to handle receivable challenges, and stick with it

Finally, have a complete system outlined to address receivables issues.  It is always good to create the system when you are not in the middle of the challenge!  Logically think through the issues that might arrive, and develop solutions proactively.  Be prepared to educate your customers concerning your system.  Let them know what will happen if they have a challenge paying you on time (The Godfather? –ed.) so there are no surprises.

The bottom line is that if you are not collecting your money, you need to take responsibility and make a change.  Call me if you want some more great ideas and help for your specific situation.