What do you think keeps the entire entrepreneur community awake at night? Cash flow. While others enjoy lascivious dreams we stare at the ceiling wondering if we should persist with the late paying client? Our excitement comes from figuring out how to pay the bills next month!
There are going to be more late payers and bad debts as the months go on. Dun & Bradstreet estimates that businesses take an average of 52 days to pay their bills which means businesses are denied access to their own funds for three weeks.
What should you do? First of all establish a buffer – a two or three month reserve that you put aside as a buffer. Next, don’t hold back with late paying clients. If you don’t ask you don’t get. Find a staff member who is as tough as nails and doesn’t mind getting to know the accounts payable people personally. Encourage them to do what ever it takes to get that money. Make sure they ring the day after payment is due. And stick to your terms. If clients decide to extend the terms, ring them personally. Tell them that if they slow down their payments it will cost you X amount that will be added to their bill. Offer discounts for cash in hand.
Lastly make sure you develop a cash flow projection, check out new clients with a credit assessment before they come on board and make sure they sign on to your accounts payable policy.