Looking to improve cash flow and profitability this coming year? Then take a look at your billing and collection systems. Most small businesses have opportunities to get paid consistently without investing a lot of time and money chasing the cash.
Common Billing Mistakes
- Send end-of-month statements that support individual invoices you previously sent. These cost you time, money and resources and are not necessary. Stop sending them unless specifically requested by the customer.
- Not enforcing the payment terms and conditions you set with customers. Customers figure out quickly which vendors tolerate late payments and which do not. Don’t be left on the bottom of the payment ladder.
- Extend credit without any guidelines or credit checks if credit requested exceeds a pre-set amount.
- Allow customers to take ‘early payment’ discounts when the payment did not arrive early. If you are not going to enforce it, then eliminate the discounts as an option.
- Send invoices via multiple methods such as email and mail. Why send it twice? Determine the customer’s preference and send it only via that method. Always push for email if possible – it gets there faster and saves you time and money.
- Lack of timely billing. You can’t get paid until you invoice a customer and nothing raises more questions and creates further delays than bills sent out 2-3 months late without explanation.
- Poor quality control in billing, including wrong contact information, incorrect amount or unclear descriptions of services, cause delayed or non-payments. When it comes to billing, accuracy is important.
- No system or process in place to consistently monitor, follow up, and take action to collect on past-due dollars. The squeaky wheel gets the grease or in this case, the payment. Don’t wait for cash flow crunches to follow up – make it something that is done consistently.
- Lack a shut-off policy – or a lack of enforcement. You must be willing to stop doing business with customers who do not pay or use your business as their bank.
A quality system, consistently and efficiently implemented, will go a long way to improve your cash flow and profits. Make it an ongoing process and you will reap the rewards.
More Ways to Grow Your Business
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