Top Ten Ways to Improve Cash Flow - Part 1

In good economic times, collecting your money on a timely basis can be an extraordinary challenge.  In tough economic times, it can seem near impossible.  Here are some tips to get you going in the right direction.

1. Get a Retainer

Far too many firms are afraid to ask for a retainer and they mask this fear with a seemingly rational excuse.  The excuses range from, "this client would never pay a retainer" - to "our competitors never ask for a retainer".  However, the reality is, I have never heard of anyone losing a project because they asked for a retainer.  The worst thing that can happen is they refuse to pay it.  Even if only 25% of your clients agree to a retainer, you will still be way ahead of the game.

2. Streamline Your Invoicing Process

Streamline your invoicing process to get invoices out the door as quickly as possible.  Many firms take 3 to 4 weeks to issue their monthly invoices.  Sending invoices 3 to 4 weeks after the fact sends the wrong signal -- and the signal is that you don't care about the money. There is no excuse for issuing 100% of your invoices no later than 10 days past months end.  In fact, 80% of your monthly sales should be sent with 3 days of month end.

3. Revise Your Contract Language

Review your standard proposals to make sure that payment terms are adequately addressed.  Be specific about invoicing frequency, invoicing format, payment due dates and the right to stop work for non-payment of invoices.

4. Find out Your Clients Payment Cycle

Talk to your client to find out what are their critical cutoff dates.  If your invoice needs to be received by the 5^th of the month to be paid by the 30^th of the month, make sure it gets there by the 5^th.  If you miss the deadline by 1 day, it will delay payment by 30 days.

5. Consider Electronic Invoices

Some of my clients are having good experience with sending their invoice electronically.  In addition to the client receiving an invoice 2-3 days faster and reducing internal paperwork, an electronic invoice has the advantage of delivery confirmation.  This reduces the likelihood of "I never received the invoice" excuse for non-payment.