Tips to getting paid!
the pocketbook. The tips below will help you and your staff to be aware of things that can be done to reduce the exposure of missing out on collecting your hard-earned money.
My first question:
Do you have a structured process to follow for drawing up necessary documentation such as engagement letters, contracts, creating invoices to bill your customer, and finally collecting payment?
Signs you have a collection problem:
You and/or your administrative office do not follow up on money that is owed to the business.
Tip: the older an invoice becomes, your percentage of chance on collecting the money reduces quickly.
At 45-60 days outstanding, you have a 25% chance of not collecting on the money owed. At 90 days,
your percentage drops to 50%. Get on the phone and collect that money. Do not procrastinate at all. If
they don’t pay you, they are going to pay someone else. Make sure it is you!
You and your staff do not know how much time is between the time you invoice and receive money
from the customer and/or if you are receiving payment at all.
Tip: A bookkeeping system can help you to know who owes you, how long it’s taking to receive your money and much more.
Ask yourself: how can I improve my current process for collecting revenue. Before reading on, what do
you suppose these steps could be? What can you do to protect you and your business from not being
paid for your work?
- Do you extend credit? How do check the credit worthiness of the customer you are going to do
Best practices: credit application (prior to work or service done). Require references and actually
call them. If your industry has associations that can offer additional information, subscribe.
Often, belonging to these publications can help you to know who your doing business with. You
can also subscribe to credit companies such as Dunn & Bradstreet. These companies keep up on
thousands of businesses to help folks make educated decisions. Here’s their website to research
what they offer https://www.dnb.com/.
- To get cash into your bank quickly – bill timely (within 24 hours) for customers whom you extend
credit to. The sooner you send out your invoice, the sooner you will get paid.
- Submit your invoice to your customer electronically. Applications such as QuickBooks allows you
to bill for your services right from the jobsite using your smart phone.
- Make it easier for your customer to pay you. In today’s business world, thousands of businesses
are processing by using EFT, direct deposits via wire, and credit cards.
- Reduce the terms you extend. This gets you your money quicker too!
Using the Internet services for sending invoices and receiving payments reducing several days of mail
time. You would be surprised to know the difference in your profitability just by making simple changes
to reducing your time between invoicing and collecting.
- Collect payment in full up front! Use progress billing. Obviously this only applies if it makes
sense in how your business model is set up. Receiving payment up front will reduce your
expenses which directly affects your profitability. Are you purchasing materials to perform a
job? How are you buying them?
Using your cash reduces your operating cash. Putting it on an account can cost you interest. Another
direct hit on your bottom line. You don’t want to pay interest if you can avoid it. Besides, getting
payment for at least the initial purchase of materials or work you will perform reduces your potential to
experience a double whammy! Paying for materials, and not getting paid!
Use an accounting software system such as QuickBooks. Using a system helps you to keep track of who
owes you money and who has paid their bills.
Run a weekly accounts receivable aging report. Study it and understand where your customers are with
their accounts. Are they paying you on time? Are they taking excessive time to pay you? Do you see
changes in how your customer has been paying? For instance, is their normal days to pay 30 days and
now you are seeing they are currently paying at 60 days?
Run this report every week and make weekly calls to your customers. Stay on top of collecting your
Follow up on short payments.
Advantages to using accounting software:
- You know who owes you
- How much they owe
- How old the invoice is
- If the customer paid the invoice in full
Many signs are presented as tips to pick up on; that your customer is headed down a bad road to
experiencing a cash flow problem. When these signs are present, be proactive in collecting outstanding
money owed to you. Take caution in how much credit you extend from that point until you feel
comfortable in increasing the credit line. The list below are the flags I have personally had experience
with. Many others exist so be on guard with eyes wide open.
One of the best ways to stay on top of this is to have good communication between you and your staff.
Hold them accountable and hold yourself accountable.
- Customer is dodging your calls
- You leave voicemails, emails, texts, maybe you stop by. They are nonresponsive and seem to
have fallen off the face of the earth
- Customer does not keep their word. You finally get a hold of someone who gives you the
answer, “checks in the mail.” Check doesn’t arrive – surprise! Ask for a check number, date,
which invoices are included in the payment, expected mail date…
- Customer recently did a series of layoffs cutting their staff to reduce expenses
- Customer is stating they are waiting for funding or to be paid for an insurance claim. Sometimes
a customer may experience a huge loss; something which could not be avoided. Be
understanding but persistent.
- Payments you receive have been held for a period of time before it was sent to you. On
accounts that have taken a while to collect, check out the postage date and compare it to the
check date. How much time has lapsed? This is a flag that they are in a tight money crunch
sending payments out based on how much money is coming in.
I hope these tips have and will be helpful to your business. I am a master collector of receivables! There are multiple ways you can put delicate or not so delicate pressure on your customers to get you paid.
Are you experiencing cash flow problems? Collecting or not collecting money is only one of many
potential causes to disrupt harmony in getting cash into your business.
Are you looking to grow your business? I hold trainings to teach you how to Grow Your Business! Did
you know there are only 4 ways to grow?
A little about me:
I am a Profitability and Growth Advisor. I work with small to medium business owners to make a
significant difference in their income, improve operations, and often as a result, the value of the
What obstacles might you be facing in your business right now? Schedule a free session with me!
Let’s work together to get you on your way to maximizing your money!
Always an honor and pleasure,