No matter how small your business is you need cash to meet your payables.
A recent survey we conducted suggested that a small business’ number one mistake was not having ongoing insight into their finances (cashflow). While many small businesses are actually doing a good job of staying on top of their business, they are finding it difficult to get paid. They have to follow up over and over again with a customer.
I recently caught up with a small business that had over $20,000 in outstanding invoices. Some of these outstanding invoices were with large companies that you’d suspect would have full accounts payable departments to administer payments. To make matters worse, this particular business recently had their credit card frozen for non-payment. Not fun.
This situation isn’t an anomaly. Many small businesses are going through the same thing and ending up in a vicious circle of chasing and following up on payment to help fund their ongoing expenses.
To help with some of that pain, here are some best practices:
1. Set your own payment terms including invoicing dates and due dates.
2. Inquire about your customer’s payment cycles before engaging and ask them if they want to be invoiced 100% upfront. Sometimes they are trying to push through allocated budget towards a quarter end or year-end and this structure is welcomed.
3. Require a signature on estimates and in every written communication with your customer include due dates of payment.
4. Ensure you are added into their system with your phone number, backup phone number and full address.
5. Ask for a primary contact to chase for payment and also a secondary contact in the event that the primary contact is out or on vacation.
6. If you need to travel to meet your customer then have them book it and pay for it.
7. Use online accounting software, such as Xero, that connects with your bank account and makes it dead simple to see what money is coming in, what money is going out, and track the “baddies” with overdue payments.
Check back soon for Xero’s dedicated resource about invoicing and payments.