A Key component of cash flow management is proactive management of your receivables. This is well understood by successful
companies, but often neglected or only passively managed by new or small companies.
Many people hate making the calls to collect money. Here are some simple best practices to turn your receivables to cash faster
with less effort. It's your money once the work is performed; you do not have to apologize for asking for it. Your customers
will respect you for being a good businessperson.
- Send invoices as early as possible. Most maintenance companies send out maintenance invoices for the month of October on October 1. The sooner the invoice is
in the customer's hands, the sooner you get the money. Many commercial clients will pay prior to month's end. They get on
a cycle where you may get your money by the 15th or 20th of the month.
Ask your new clients how their payment process works then plan to get them the invoice at the earliest time to ensure they
can pay you on time. Get the name of the payables person.
- Train new clients early. When you get a new customer, make one call the day the invoice is due to remind him that you expect timely payment. If you
do not, he will test you. Don't be a financing source for your customers. Train them early and right.
- Get invoices for extras billed immediately after the work is complete. Make sure the necessary approvals are signed off. Many companies lose important cash flow from their extra work. Field crews are slow to turn in paperwork and owners and managers
allow it. The office can't send the bill. Often people selling the extra work fail to get a signed work order or purchase
order from the client. Or, the billing amount changes from the initial work order and this slows down the process. This lack
of discipline allows the customer to drag out the payment or, worse yet, gives him the excuse to miss payments. It goes to
60 then 90 days. Then you call and the client has a fuzzy recollection of what was done and may engage his selective memory.
You know the drill.
- Get tough with slow-pay customers. Many landscape companies take the passive approach and send a statement with a happy face asking for payment. You know when
you receive these passive attempts you set them aside and pay when it works for you. However if the owner of your supplier
calls, you usually pay right away. You should do the same thing. Set one day aside per week to make these calls. Once you
start this practice you will find it takes very little time. You train your customers to pay.
- Make sure to limit extra work for customers who have overdue balances. Most companies do not have controls in place to even let sales people and schedulers know they are creating a larger receivable
with a slow-pay client. Use the leverage that is available here. These are simple but sound best practices for your business.
It just takes some self discipline.
— The author is a partner with entrepreneur Tom Oyler in the Wilson-Oyler Group, which offers consulting services. Visit
http://www.wilson-oyler.com/.
