A recent poll has shown that the biggest concern faced by businesses is the ability to pay expenses and debt repayments on time. Ann Gibbard shares 12 tips to get the cash you need to power your business.
Payment of invoices by customers.
The first rule: the quicker you invoice, the quicker you will get paid.
I had a plumber visit to fix a toilet. It took 7 working days to be invoiced for the job. If I had been invoiced within one working day, the plumber would have the cash in his bank account to be able to pay the staff member’s wages the following week.
Other ways to get paid faster:
– have clear information on your invoice so that the customer knows what they are paying for
– shorten your payment terms (3 days, 7 days, 30 days)
– put bad payers on cash in advance or cash on delivery
– make it easy to pay (EFTPOS machine or equivalent, online credit card payment etc.)
– include terms of trade on your invoice
– follow up slow payers straight away, don’t let it get to 60 days
A few small tweaks will reduce the lag between doing the work and getting paid.
Reducing wastage
Another lever to create cash is having more profit left over after paying your direct costs, i.e. improving your gross profit.
There are many ways of doing this, depending on your business. One area of focus is to reduce wastage.
Wastage comes in many forms:
– unbillable time due to time waiting for materials, rework, training/inexperience, multiple visits, unclear instructions, interruptions etc.
– unbillable materials due to rework, wrong materials, damage
– unbilled variations
Find the causes of wastage in your business, and work with your team to plug the leak.
Increasing revenue
There are three ways to increase revenue
– a higher price for what you are already selling
– selling more products/services to existing customers
– attracting new customers
Price
When was the last time you reviewed your prices? How do your prices compare to your competitors? Unless you have a high volume business (e.g. Kmart), you do not want to compete on price, but instead the value of your product or service. Are you eroding your margin by offering discounts?
Existing customers
Do your customers know everything you have to offer? How many customers do you have on your database? When was the last time you communicated with them?
New customers
Think about who your target market is and where they spend their time. How many ways and how often can you make yourself visible to your target market so that when they are ready to purchase, they already know who you are.