Three Tips To Help Your Cash Flow In A Crisis
The COVID-19 pandemic has led to unprecedented economic turmoil. Businesses are left scrambling how to cover rent and payroll and how to keep their doors open. Just like you need cash flowing in to keep your business running, so do your clients. So, what do you do when you need payment, but your customers are facing the same cash-flow constraints as you?
Freelance journalist Hannah Smith says there are some ways to maximize your cash flow by asking your clients to pay their outstanding invoices. In this issue of Promotional Consultant Today, we discuss Smith's tips for making your collection process more rigorous while maintaining thoughtfulness in this difficult season.
1. Remember to show some empathy. The past several months have thrown businesses and families into uncharted territory. Keep that in mind and note that your clients are likely struggling rather than trying to avoid paying your invoice. When the world emerges from the crisis, you will still need your customers, Smith notes, so always try to do the right thing. If you have the financial flexibility to give your clients some breathing room, now's the time to grant them some extra time in paying. Consider offering them a payment plan so they can clear a debt in installments. Or, you could offer them a grace period with the understanding that they will pay your invoice by a mutually agreed date.
2. Reach out via phone. In this era of social distancing, communication is paramount. If you are following up on an invoice, Smith advises calling your customers rather than sending an email. She says it's much easier to ignore or delete an emailed request for payment. When you can speak to your clients on the phone, you can also get a better understanding of their financial situation. Maybe they need more time to pay because they are also tracking down overdue payments. Sometimes, a candid conversation is what it takes to come to a solution that works for you both. If you have a long list of overdue invoices and you do not have time to contact everyone by phone, Smith suggests focusing on the high-value invoices first.
3. Simplify the payment process. If you want to get paid quickly, make it as simple as possible for your clients to pay. This means they should be able to take care of their invoice in just one or two clicks. Smith recommends checking if your cloud-based accounting software offers automated payment reminders or automated late-fee charges. If so, take advantage of these automations to help streamline the process. Always aim to send invoices electronically, and ideally with a "Pay Now" button. If you send paper invoices, you risk a delay in clients receiving them. It's also much easier for recipients to file an envelope away for later or just not open at all. Smith also suggests offering a range of different payment options and displaying them on invoices so your clients can choose the payment method that works best for them. Also, if you regularly invoice monthly, consider invoicing more frequently.
Cash flow is crucial to your business' success. In these trying times, stay in touch with your clients and follow up thoughtfully on outstanding invoices. Your clients may be more apt to pay right away if they know they have options. Remember that they are also likely waiting on invoices to be paid, so extend some empathy.
Compiled by Audrey Sellers
Source: Hannah Smith is a freelance journalist with a background in the trade press covering asset management. She often writes about personal finance, peer-to-peer lending, and small business.