4 Tips for Improving Cash Collection
Cash is king, every small (and even large) business owner knows this is true. Yet for most organisations cash collection and chasing aged debts is seen as the responsibility of the finance department.
Why is this the case? Often the finance department has no first-hand knowledge of your customer, they haven’t met the people paying the bills and they weren’t involved in negotiating the deal.
Yet they are left to chase up the cash. Why? Because the finance team are normally the only people with access to the invoice information and know which customers haven’t paid their bills.
If all of your customers pay their bills on time and nobody ever quibbles over an Invoice, maybe this approach is fine. However, if like most organisations you are investing time and effort in chasing your customers for payments, maybe you could consider involving the people who know your customers best – your sales team.
I’m not suggesting you could get your expensive sales team chasing every invoice, however by following some of the advice below you could significantly improve your cash flow.
Tip One: Commission on Collection
Consider only paying commission when your invoices are paid, not just when you bill your customer. The sales team will moan, but it is the most effective think you can do to improve your debtor days. If you don’t want to move to paying the entire commission of collection, consider 50% on invoice and 50% on collection.
Tip Two: Make sure the sales team know about outstanding invoices
Sales teams can’t help with cash collection if they don’t have the right information. Make it easy by ensuring that your sales team can see what each of their accounts owes in a simple dashboard. If you use the Business Edition of Workbooks then this is really easy, because all the data is in one place. If not, consider how you get the information to your sales team in way so that they may actually use it.
Tip Three: Make it part of your sales management process
When you run your regular sales meeting, make time for a review of debt. If you have some customers who haven’t paid, the sales team may know why and more importantly they will be able to find the right contact at your customer to get the issue resolved.
This could be just 10 or 15 minutes at the end of your weekly sales review, but could make a real difference to your cash flow.
Tip Four: Sales incentives for early payments
You commission your people on sales, so why not structure their pay plan to incentivise them to get prompt payment? You could offer an incentive for 50% upfront payments or for payments made within 15 days of invoicing. If you are selling recurring contracts (like us), offer additional incentives for customers willing to pay for multiple years in advance.