Collecting Payments For Your Business
Cash is Queen – But chasing it is a royal pain…
I have seen many different approaches to collecting cash from customers. The most common one is to provide the product or service and then send an invoice. In other words, ‘what everyone does’. The more imaginative of us offer early settlement discount, and some sectors like building perhaps invoice in stages, but really that is it.
This approach leaves a problem. How do you then go on to collect the cash from the customer? Some customers pay reliably, and it is great to have those. Such is the level of unreliable customers though, most businesses feel the need to have a credit control function as part of their team, which regardless of the scale, is very expensive and a glorious waste of time. Taking a step back it can’t make sense to need to employ people to collect money from customers who have already agreed to pay it to you!
One of the things I love about Alpaca is the fact that we all constantly encourage each other to tear up the rule book. Assumptions that I have held as ‘the absolute truth’ I now feel able to challenge. Why not apply this thinking to invoicing and cash collection?
If we assume that the ‘do the work, raise the invoice and sometime later collect the cash’ model is fundamentally flawed then why not think differently? What would happen if you asked your customer to pay you at the start, before you have done any work? This is just as logical as you doing the work first, it is just a different person is at risk, i.e. not you!
You need to think about why your customer would agree to pay up front, and for this you need to think about ‘tradeables’. Clearly you need to offer something to your customer to get what you want in return, i.e. up-front payment. There are some tradeables that are applicable across all business, e.g. offering a discount, and that might work if this is economic for you. But think carefully about what else you might offer, e.g. quicker delivery, better quality or added extras that are attractive to your customer.
Get yourself a list of 52 tradeables, like a pack of cards, and you will always have something to play when you are negotiating. The aim is never to chase for payment again!
If you would like to talk through collecting cash or anything finance related then please get in touch on 07587-775 681. Let me know how you get on.