Small Business Cash Flow Management: Collections Strategy
This is something all businesses struggle with: getting paid and getting paid on time.
Dawn Fotopulos, small business consultant and founder of Bestsmallbizhelp.com, discusses five ways to improve your odds on getting fully paid, on time. Below are her tips:
- Know your client’s payment cycle – Find out when your customer cuts checks and put the dates in your calendar. This way you will know when to expect payment and not be playing the guessing game.
- Confirm invoice is received – Sending a confirmation email or letter provides you with a paper trail. This is useful if you ever have customers claim they never received the invoice.
- Send invoice in advance of check-cutting date – Once you have figured out #1, be sure to send the invoice before the check-cutting date. This way you will not have to wait longer than necessary to receive payment.
- Know about sign off policies – This may not apply to all of you, but some customers will require a sign off on invoices greater than a certain size. By determining how your customers handle invoices, you can better judge when to send the invoices and therefore when you will be paid.
- Send smaller invoices – Sending smaller invoices with greater frequencies will help you get paid faster. It's less intimidating and feels more manageable for the customer.
By being paid fast and on time, you lower the amount of cash you must borrow to stay afloat. All of these tips may not be achievable for your company, but even using one of these will greatly improve your odds of receiving the money when you need it!
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