Here are the Five Key Rules:
Many business people and entrepreneurs are extremely brilliant at what they do – creative, inspirational and enormously energetic. If they don’t recognise the realities of running a commercial business, the sad truth is that this counts for nothing.
Cashflow means Life or Death:
# Make Cashflow Management a fundamental and absolute priority – it’s the oxygen of your business.
# If you don’t want to do it, then make it an absolute priority for one of your team – and make sure they know what they’re doing.
Be clear about the Risk you are taking:
# Don’t make this a gamble.
# Don’t depend on any feelings of goodwill towards the client – it’s not a charitable donation.
# Find existing suppliers to talk to about their payment experience.
Be in Full Control of the Process:
# Be very precise about what the payment terms are.
# Get a payment up front – say 30% – and then 30% for achieving a clear milestone with the balance on completion.
# Build a factor for late payment into your pricing – say 10%.
# Offer a discount for prompt payment – but allow for it in your pricing.
The End Game:
# Use a third party to make chase up calls – friend or family – keeps you cool!
# Chase up after agreed payment date.
# If it stagnates, send out diarised letters 45/60/90 days.
# Think about the legal remedies you may have – in the UK, for example, the Small Claims Court if the debt is under ₤ 5,000.
# Use a debt collection agency.
Learn from the experience. What would you do differently next time?
Ensure the Client Understand your Regulations:
# Take time to find out what the client payment process is.
# Issue your invoices on time.
# Phone the client to make sure invoice has been received.
# Get to know someone who matters in the accounts department – they often respond to some TLC.
# Is your team totally aware of what they need to do here – are they making concessions on your behalf?
# Chase immediately they become overdue – but don’t assume the worst – is it can pay/snafu or can’t pay/cashflow?
When they will pay, # Get a clear commitment as to.