Getting Paid for Better Cashflow

Thought of the day…. “When a recession does materialise, many experts agree, ready cash is the oxygen that every small business owner requires to survive.” Anon

The impact of Covid-19 and the associated lockdown has made it more important than ever to ensure, where possible, that you’re still getting paid.  We appreciate that these are difficult times with great uncertainty and concern for you all.  We want you to know that we are here for you, albeit remotely, to give you whatever support we can to get you through these difficult times. 

Sir Richard Branson also refers to cash as the oxygen the business needs to survive.  While of course cashflow can be very difficult in these times, today I want to share with you some practical things you can do to preserve that cashflow and today I wanted to talk about your debtor system.

Your Debtors System:

1. Best Practice

Essentially nothing should change – just dial up your empathy! By engaging more with your customers around their particular circumstances you can tweak your processes just for the customers who are going to struggle.  Remember that not all of your customers are at great risk here – COVID-19 should not give them an excuse not to pay you.  You have done the work or supplied the product, you’re running a business and you need to be paid.

Be empathetic - Showing some empathy and asking how your customers are coping and how their business is going goes a long way. Consider the loyalty they’ve shown you and give your customers options about how they pay you. We have heard some horror stories of businesses who are stopping credit and ramping up their debt collecting without any thought for how their customers are coping. We know this isn’t you. So long as we are being empathetic and giving clients choices we can talk about how we are going to get paid. A useful mindset here is remembering to have backbone and heart.

You should all be using paperless systems – if not, this is going to need to be your top priority or your customers simply won’t know how much to pay.

Best practice credit control is that you have great guidance notes for the team members responsible for your credit control and debt collecting.  Things like flowcharts, scripts and templates. You will find some content on this in our resources page.

Many problems with debtors come about because we have not put great systems in place around giving credit in the first place.

2. Credit Control Services

 Its important to remember that credit control is not just about following up your debtors – it’s a complete system from when you take a customer on through till when they pay you. We recommend that you out-source your credit management – we not only believe that it is best practice, it frees up your time as well.

 It is essential that you build a relationship with our chose provider so they can understand your core values, your style of communication and the language you use.

 Having said that out-sourcing is best practice, it is not an ambulance at the bottom of the cliff – in the current climate, you can’t suddenly outsource credit management for customers who are going to really struggle in these difficult times as this will cause brand damage for you and the credit controller (not to mention waste a lot of time). I have developed some content you can use that you can find on our resources page.  Our Financial Awareness coaching program is a great way to drill down even further to make sure you have ethe best systems in place to free up your cashflow.

 We recommend Illion and Equifax for credit checks for new customers – you don’t want to inherit other firms non-paying customers even in the current climate. Credit checking should be a standard part of your onboarding process.

3. Getting runs on the board quickly

So how do we pull all of this together in a meaningful way in our current climate and into the future?

•  Out-source credit management where you can – be careful here though as if you suddenly enlist the services of a credit controller or debt collector with customers who you know are highly unlikely to be able to pay you then you risk irreparable damage to your brand. So, if you already have a credit manager, then use them for your customers you know should be able to pay during these difficult times – don’t those customers use the current crisis as an excuse not to pay.  If you don’t currently use an out-sourced credit controller, this is something we recommend you implement as part of your long term commitment to your overall credit management.  In either case, you’re most likely, going to need to deal directly with the customers who can’t pay you.  Remember the points I made earlier about being empathetic with those customers, we have guides and scripts in our coaching program.

•  Revise your terms of trade and proposals – make sure you don’t perpetuate poor practice into the future. Once again we have plenty of ideas we can share with you on a one on one basis as part of our Financial Awareness coaching service – the strategies you adopt here need to be tailored for your particular business.

•  Remember to look at your billing process – get customers onto repeating or automated invoicing where you can so that you’re never slow in getting your invoices out. Consider if it’s possible to create contracts with your clients with more regular invoicing e.g. a deposit on acceptance of a proposal or interim invoicing or progress payments if appropriate.  If you have additional or out of scope work, make sure you communicate that early and get an acceptance from your customer in advance of doing the work so as to avoid a complaint or invoice query or dispute after the work has been completed.  Also check that you have revised your price list to ensure that the margins you expect are being preserved.  A great way to do this is to use any time you have at home now to back cost the last few jobs you’ve done to identify if the returns you are getting match what you expected when you issued your quote.  Likewise, if you’re in retail or hospitality, you can use this time to review your margins and pricing.

•  Automation - With so much cloud-based technology now is a great time to be looking at how you can use automation to free up your time and cashflow – as well as repeating invoices consider how you can move your proposal or quoting process to a paperless and on-line option.

•  Last but by no means least, take a look at your Management controls and procedures about spending and invoicing – for example, set limits around what stock or products can be ordered. Consider how you can reduce your levels of stock or improve your efficiency in operations.  Whatever you do, don’t keep working for customers who don’t pay – you are running a business and right now you need to reduce your risk wherever you can

What Next?

So we’ve set out for you the mindsets you need to have in these difficult times.  To be empathetic, have backbone and heart around debt collecting.

We’ve shared best practice about credit control and debtor collection and have created you a guide and scripts you can use. Go and have a look now on our resources page so you have it!

Now it’s essential that you decide what you’re going to do – as we have said before clearly doing nothing is not an option.  Now’s the time to put the oxygen mask on yourself and make a plan to get through.

Part of that planning is to surround yourself with experts –we are here to help you.