Top 10 Tips For Collecting Cash Quicker

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If you struggle to get paid quickly when you have made a sale then this guide is for you.  Read on for our top 10 tips for collecting cash quicker and see that bank balance rise!

1.      Raise timely sales invoices

Until the sales invoice is raised cash cannot be collected, so raise the invoice when the work is done or when the goods/service have been delivered.

 

2.      Remove reasons for non payment

Incorrect invoices and administration discrepancies are the main reasons given for non payment!

  • raise accurate invoices
  • use right prices & quantities
  • quote Purchase Order numbers
  • attach any other documents required by the customer (eg proof of delivery)
  • make sure it is sent to the right person at the right address
  • ensure that it is clear what you are invoicing for
  • if a credit note is required make sure this is done quickly.
  • make sure invoice has been received & send a copy quickly if requested
  • note this can be done when you chasing payment dates for older invoices for the same customer.
  • and continue to provide great customer service.

 

3.      Avoid Cheques

  • On 30th June 2011 the Cheque Guarantee Card Scheme, by which bank guarantee payment of cheques if presented with the guarantee card, was withdrawn.
  • Cheques can still be written and accepted but there is less certainty than before as to whether it will clear.
  • Instead provide the customer with your bank details so they can pay online.

 

4.      Have a system & process

If there is no proper system or process for chasing payment of unpaid invoices then the cash receipts will be much lower than they should be.

  • someone in the business must be responsible for chasing unpaid invoices.
  • ensure cash collection is done regularly on a regular basis (ie daily or weekly).
  • if it’s someone other than you then you need to review their work to be sure they are effective.
  • chase unpaid invoices as they fall due – starting with the highest value invoices & customers with the highest value of unpaid invoices – this will generate large cash sums quickly.
  • make a record of any ‘promised’ payment dates & make follow up calls immediately if payment is not received on time.

 

5.      Understand the customer

If your invoice does not fit neatly into your customer’s system for processing invoices then you can expect delays in processing…meaning it will take longer to be paid!

  • send the sales invoice to the right person & the right place
  • send monthly statements – some customers will only pay on receipt of this so for them no statement means no money !
  • many customers only pay their suppliers on set dates in the month and it is vital to know when these dates are. Then chase payment of unpaid invoices a few days before – this should ensure your invoices (rather than anyone else’s) will be included on their next payment run.
  • you need to establish a good relationship the person in your customers’ accounts dept who will authorise payment – if they like you they will be more likely to pay rather than someone else !

 

6.      Deal only with credit worthy customers

Make sure that customers are credit worthy and will be able to pay your invoices!

  • do a credit check on both new and your largest customers and make sure they are creditworthy.
  • give customers credit limits and stick to them. If they are coming close to their limit then they need to send you some cash.

 

7.      Obtain Stage Payments & Deposits

This is particularly good if the work will either take a long time or if you are buying goods specifically for that customer and cannot be resold to anyone else.

 

8.      Agree your terms & conditions

  • Ensure payment terms are discussed & agreed with the customer before you start dealing with them. If not the customer will pay you according to their standard payment terms which maybe 60 days !
  • Ensure your terms & conditions are stated on the invoice.

 

9.      Use Volume Rebates instead of Sales Discounts

To reduce their costs some customers will ask you for discounts on your existing sales prices – why not offer quarterly or annual rebates instead ?

  • Discounts on your existing prices will reduce not just your margins but your cash receipts too.
  • An alternative is to offer your customer the discount based upon the level of business done over a given period (say a quarter or year).
  • This incentivises the customer to stay with you (rather than switch to someone else offering a cheaper price) & buy more from you.
  • The benefit for you is that the discount only needs to be paid at the end of the quarter or year. In the meantime the cash stays in your bank.

 

10.    Be prepared to take legal action

  • If the customer just will not pay your invoice then legal action should be taken. After all do you want this customer who does not pay your invoices to remain a customer?
  • Don’t be put off by the perceived high cost of legal action.
  • If you want to avoid legal action then consider payment plans where an agreed small amount paid on a regular basis (eg weekly). It may take a while for the outstanding debt to be paid but a small amount is better than nothing and it does leave the door open to continue to work with your customer later.

 

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At KMA Accountancy we can help you every step of the way.  For more information give us a call on 0161 929 4763.

Disclaimer
This article is for general information only and no action should be taken, or refrained from, as a result of this information. Professional advice should be taken based on specific circumstances in each individual case. Whilst we endeavour to ensure that the information contained in this article is correct, no liability will be accepted by KMA Accountancy for damages of any kind arising from the contents of this communication, or for any action or decision taken as a result of using any such information.

 

Get in touch

0161 410 0020
info@kmaaccountancy.co.uk

KMA Accountancy
Progress House
17 Cecil Road
Hale
Altrincham
Cheshire WA15 9NZ

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