Your business is unique, but like others, it needs a strong influx of cash to stay afloat. Are you doing everything you can to maximise your cashflow?
A faster working capital cycle delivers a more secure cashflow, letting you drive more success for your business. Prompt collection of invoice payments is critical to maintaining a healthy supply of working capital.
But a recent survey conducted by American Express found that 69% of SMEs1 have to wait till after the due date to be paid by their customers.
Cashflow problems often cause businesses to turn down new opportunities. In fact, our survey found that some businesses have lost out on up to £100,000 in new opportunities in a single year. All because they don't have the cash available to deliver on new projects.
Here are 9 steps you can take to make it more likely that you’ll get paid on time:
When you establish the relationship with your customer:
1. Run credit checks. When you work with a new customer, running a credit check gives you a picture of their financial history and let's you know whether they're likely to pay you on time consistently.
2. Set clear payment terms. If you haven’t already, set up payment terms with your customers by working together to come up with something that benefits both parties.
3. Offer convenient payment options. Being flexible and letting your customers choose the payment method that suits them removes any difficulties they could have in paying you.
When you have delivered your service:
4. Use progress billing. If you're working on a project with multiple stages over a period of time, progress billing lets your invoice your customer after defined stages. Using progress billing means that late payment issues are flagged before you've delivered everything, potentially making it easier to resolve.
5. Invoice promptly - every time. Programs like Zoho Invoice or Bokio can help you automate the sending frequency of recurring invoices, as well as track payments and overdue accounts in one place. Many customers are often very busy and will simply forget to pay on time. You may find they appreciate the friendly reminder.
6. Call overdue debtors. It's easy for customers to forget to pay you or let it drop to the bottom of their to-do list. Giving them a call ahead of payment date or soon after helps to remind them.
7. Offer payment plans for overdue debt. If your customer is struggling to pay the invoice in full, offering a payment plan can be a win for both sides. It helps them manage what they owe you and it ensures you get paid in full.
8. Consider prompt payment incentives. Offering incentives, like credit to put towards a future purchase, gives your customers a compelling reason to pay you on time. Offering additional purchasing incentives throughout the year — like to celebrate business anniversaries and holidays — is another way to help build repeat business.
9. Work on customer relations. By building stronger ties with your customers, they may be more likely to pay on time. Some easy ways to help build a rapport with current clients is to institute a system for customer feedback, as well as provide an easy way for customers to get in touch with any concerns. Customer management software like Insightly can help you capture important data to help you shape your conversations with clients.
Creating a prosperous business is often a matter of timing, like jumping at new opportunities when they become available. Cashflow can often provide a roadblock here -- you know your business has money coming in, but you don’t have the money now to take advantage of a particular opportunity.
With an American Express® Business Card you can make essential purchases without the need for immediate cashflow. Instead, you can charge your business purchases to the Card and pay those expenses off up to 54 days later2. This is a charge card as opposed to a traditional credit card, so you won’t be charged any interest for your purchases.
In the short term, this releases you from being beholden to your current cashflow, which in turn allows you to capitalise on every opportunity that comes your way.
Using a Charge Card can also offer additional cashflow benefits, depending on the particular Card you pick, such as:
• Earning valuable Membership Rewards® points on the items you buy to put towards additional business purchases
• An evolving purchasing capacity that grows with the needs of your business
1. In July 2019, American Express surveyed through YouGov 1,000 SMEs across the UK.
2. The maximum payment period on purchases is 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date.