To improve cash flow, simply put, means to ensure that more money comes into your business than goes out. It’s simple as a concept but trickier when it comes to execution.
The tricky part — and why it can be difficult to improve cash flow if you have the wrong set of clients — is that you cannot control other people or entities. Once you provide a product or service, you’re subject to a variety of forces beyond your control.
- Will the client pay on time?
- Is the client capable or willing to pay?
- Will the client have a brief but uncharacteristic brain lapse and forget to pay at the most inopportune of times?
- Are there any outstanding disputes regarding the product/service provided?
All of these factors can get in the way of your business’s day-to-day operations. Here are five steps to overcome them.
Improve Cash Flow by Enforcing Payment Terms
Any serious business will make payment terms clear upfront. However, fewer than you think actually go about enforcing them. Some stats to back that up:
- 39 percent of invoices are paid after the due date
- 48 percent of customers opt for payment delays
- 52 percent ask for extended terms
Both late payments and the promise to pay at a later date are realities the business owner must live with and work around even while incurring their own expenses.
Under such conditions, you have to “know when to hold ’em and know when to fold ’em.” Except, in this case, “fold ’em” doesn’t mean walk away and run. It means you have to know when to stop with the leniency and pursue actions that will actually get you paid. It starts by treating payment terms with the seriousness of a contract instead of as a suggestion.
Offer Qualifying Installment Plans
When a customer can/will pay, but isn’t in an immediate position to, a qualifying installment plan is suggested. Keyword: qualifying. There should be terms agreed upon in the installment plan that the customer/client is diligent in meeting.
Keep Open the Lines of Communication
A strong and consistent communication strategy will ensure that your i’s are dotted and t’s are crossed in the event of needing to escalate legal actions. Furthermore, it demonstrates reasonability to the person or business on the other side of the transaction and encourages continued compliance with regard to outstanding payments.
Use a Human Approach
While failure to repay or delayed payments can be frustrating for your business, continuing to treat the client or customer with dignity and respect will improve the odds of a satisfying resolution. That said…
Know Your Breaking Point
Kindness in business is a good thing, but kindness without expectation is a sure way to end up on the losing end of a delinquent payment, thus damaging your available resources. If you really want to improve cash flow, then you need to know where the line in the sand is drawn, and you have to take action when it’s warranted.
If you’re unsure of how to do that in a professional, effective manner, we want to help. Southwest Recovery Services has over two decades of debt recovery experience. We have worked to improve cash flow for healthcare and other complex industries, and we can do the same for you. Contact us today to discuss your specific needs.