Business growth depends on revenue. Without income and cash flow, even with a business loan, a new business can fail. So why is it then, if every penny counts for small business owners at critical phases of starting a new business and business growth, that they fail to look at something so simple as their accounts receivable?
One of the costliest mistakes business owners make is they fail to look at an aging report for their accounts receivables at least once a month. Did you know that the likelihood of collecting what someone owes you diminishes with every day that passes? Once it is older than 90 days you may never be paid and…
IF YOU DON’T ASK to be paid I guarantee you won’t be.
I know you may not be comfortable asking for payment (and your employees don’t want to do it either). But really, why? You worked hard for your customers, you provided the goods or services, and they AGREED to pay you for them. Collecting what is owed does not require you to be unpleasant but you do have to ASK. I collected over $300,000 for a business owner (in 30 days I might add) simply by MAKING THE PHONE CALLS. Most often I was told they had never received the invoice (not very likely by the way, but is an easy excuse for them). That was so easy to fix – I asked for the best way to expedite it to their direct attention and sent it. I then called back and verified it was received and asked WHEN I could expect payment. If I did not receive the payment when promised, I waited 3 days and asked AGAIN to be paid. I don’t even mind if they don’t answer my call. With today’s technology they know WHO is calling and they know WHY. If you value your business, you’ll make those calls. It’s important to you and the financial health of your business.
This approach works! Do you know why? Think about the person on the other side: how do you feel when someone you owe money to has to remind you to pay them? Not very comfortable is it? It works to your advantage just as effectively. I will tell you that sometimes folks are in financial distress but they still want to pay. Help them with a plan that works for them but do still ask to be paid. (I had a client who felt so badly for his clients he stopped asking to be paid. When his accounts receivables reached nearly $100,000 and he couldn’t even pay his own bills, he had to close the doors of his business. It was truly awful for everyone.)
Assuming you are already doing a good job sending out invoices (and if you’re not, you need a better system to assure this gets done in a timely way because missing this step certainly causes you to lose money which will impact your business growth), the next step in your business growth plan is to have on your calendar a recurring monthly appointment with yourself to look at your accounts receivable aging report. Around the 10th of the month is perfect. Start making your phone calls soon thereafter – no later than the 20th. Keep track of what is said, when payments are to be sent and do your due diligence in following up.
Don’t let your money slip through your fingers because you don’t KNOW what is unpaid or because you FEEL uncomfortable. This is a costly mistake that hurts business growth every month that it doesn’t get done and it has an easy fix.
Need help, call me and I can train you!