3 ways to collect money faster from customers
Your business is all about cash flow. With cash in the bank, you’re able to easily fund your operations and make financing decisions with less stress.
Collecting money is critical to ensure your cash flow stays strong and your profitability remains healthy. Just about every small business owner I know has challenges collecting cash.
Here are three tactics that will make it easier to collect cash from customers.
1. Get invoices out fast
When you do the work, invoice the customer right away. I know that sounds easy, but in practice, it’s not.
Often, business owners like you and me get wrapped up in our day-to-day activities and find ourselves falling behind in invoicing. Doing so has an enormous, negative impact on our ability to collect what’s due.
Just think about it: You paid for the products and for the people who produced them. You also paid for any services that were performed. That means your cash was spent without seeing a return.
The longer you wait to invoice the longer it will take you to recoup that investment. You will also have greater difficulty paying for more production.
Make it a point to bill immediately. Have a cloud-based financial system that enables your people, wherever they are, to create and send out invoices.
Alternatively, have policies that require orders shipped to be billed that day or for services performed to be invoiced immediately by your accounting department. Make sure your invoices are sent by email or made available online, so your customers get them as fast as possible.
The quicker you get that invoice to the customer, the faster the cash will come in.
2. Outsource your collections
Collecting money can not only be time-consuming but aggravating too. There’s nothing worse than doing everything you promised to do, but then you’re forced to call a customer to remind them of an overdue invoice.
Plus, you have better things to do with your time. If you’re like me, you put off collecting invoices to do other, more pleasant tasks. Unfortunately, doing this hurts your cash flow.
I found that outsourcing my receivables collection solved that problem. Pay your bookkeeper a little extra. Hire a part-time employee, such as a retired person or a college student, to do your billing.
It’s worth the extra amount you pay someone to ensure calls are made and emails are sent to remind customers they owe money. A collection attorney may be necessary but only in extreme situations.
You’ll find that outsourcing your collections will not only have a positive impact on your cash flow but will ease your mind as well. That’s because you’re doing what you do best and not spending unnecessary time collecting money.
3. Take credit cards
The best and fastest way to get cash in the door is to collect it immediately. Taking credit cards allows you to do that.
Now, I know what you’re going to say: You don’t want to pay the high credit card fees. I sympathize with that. To counter, I have two suggestions.
The first is to build those fees into your cost structure and price accordingly. You can spread the fees over your entire overhead and figure that into what you’re charging your customers.
The second is to consider using only credit card payments for specific customers. These could be the ones that tend to pay late and create collection problems.
Credit cards are popular and easy to accept. Some of my clients include a credit card payment button directly on the online invoices they send out.
When you accept credit cards in your business, you’re getting your cash right away. Even if you have to absorb some extra costs because you can’t pass them through to your customers, it can still be worth it. Just think of the money your business is getting immediately, and the time you avoid not having to chase down customers who pay late pay.
Here are some bonus tips for collecting money faster from customers: Do credit checks beforehand and configure reminders in your accounting system. These, along with the three tips I’ve mentioned, will have a tremendous effect in the shortest amount of time. So, what are you waiting for?
The Growth Center does not constitute professional tax or financial advice. You should contact your own tax or financial professional to discuss your situation.