Accounting contact – In many cases Bob’s customers aren’t the actual person processing his invoices. Bob’s customer is a manager, a real go-getter, a mover and shaker; in other words a person who probably can’t be found in the office most days. Bob’s customer has what we are going to call (for educational purposes) “a Betty”. A Betty is that sweet lady, sharp as a tack, who takes care of all the paperwork in Bob’s customer’s office. Nice Betty, dependable Betty, in the office during normal business hours Betty. Good ole’ Bets, she’s always there when Bob calls to check on his invoices. She knows exactly where to find the information Bob needs about when his payment will arrive. She will wait by the fax or email for a copy of Bob’s invoice that was lost in the mail. She will make sure that Bob’s invoice gets in front of the manager for approval so that it can be paid. She will overnight Bob’s check if necessary. Bob should make the effort to know his customer’s Betty or Bernard or Mildred, he should have their direct phone numbers and emails on file. He should chat them up about their cats or their coin collections. The point is if Bob finds a way to build a relationship with them, he can get all the information he needs without waiting on his customer to return his call.
Discounts – nothing entices customers to whip out their checkbook like the prospect of saving a little money. A fast pay discount can be a surprisingly effective weapon in the battle for cash flow. To get money into the bank faster, Bob could consider offering a discount on his invoices. It wouldn’t have to be anything huge, perhaps a 1% or 2% discount for payment within 10 days. In the case of Bob’s pay-when-paid client, a fast payer discount would not have prompted them to get the money turned around any faster. BUT it may have gotten Bob paid sooner on some of his other invoices giving him a nice fluffy cash cushion to rest on while he was waiting for their payment. The small amount of revenue lost to the discount may be more than worth it, especially to a company that pulls from (and pays interest on) a line of credit to keep the cash boat afloat.
Poor Bob did finally get paid on his 2011 invoice. But just imagine how much sooner he could have been paid if he had adopted any one of these tactics. The sad truth is this particular invoice is probably not the only past due account on Bob’s books. Extrapolate this example across his entire customer base and it’s easy to see how Bob’s business could be falling into a financial situation that no business owner wants. What steps can you take to keep your accounts receivable rolling in? Have you asked Betty when your payment is expected to arrive? Would any of your customers jump on the chance to save a few bucks by cutting you a check today rather than next month? Were any of the five habits discussed in this series beneficial to your financial situation?