Video Transcript
So you’ve got a challenge with your cash flow. Here are three quick things that you can do to start improving that starting today. Number one, reach out to all your suppliers and ask them to extend your payment terms. If you’re paying 14 days, ask them to extend it to 30 days. If you’re paying on 30 days, ask them to extend it to 60 days.
The majority of suppliers will come back and say no. Some will agree to what you’ve asked and others will negotiate a halfway house between where you are now and where you are asking to be. Number two, look at your outstanding debtors. That’s people who owe you money. And when I say outstanding, it’s past their payment terms.
So if you’re extending payment terms, your payment terms are say 30 days, someone’s at 40 days. Contact everyone who’s over that payment term that you’ve agreed and ask them to pay immediately. And then diarise to chase them every other day until the payment has been received. You’ll find that most people will pay quick.
I’ve had the experience where customers would only pay when you chase them two or three times. So if you’re not chasing and their other suppliers are chasing them, Then they’ll be paying them first. So make sure you’re at the top of the list Number three is i’d look at your process from the time you send your invoice out to your customer to when you collect the cash.
I would write that system down, i. e. the timeline from when you send the invoice, to when your customer receives the invoice, to when you get paid. With technology you can now automate most of this process which will help you a great deal. I would also ask clients if they’d be interested in a prompt payment or early payment discount.
Which means if they pay the invoice seven days early, for instance, they get a one and a half percent discount. A lot of customers out there are trying to save money, so offering them a discount might be what they’re looking for and therefore they’d be happy to pay you earlier. I hope you found these three tips helpful to improve your cash flow.
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