Have you ever waited months on end for a customer to pay you? It’s not uncommon – but it can have serious consequences. Businesses can fail because they don’t have enough cash flowing in, even when sales are booming.
As Nolan Bushnell, the founder of Atari and Chuck E. Cheese, once put it, “a sale is a gift to the customer until the money is in the bank.”
Read on to find 5 easy things you can do to operate more efficiently – and get paid faster!
Loyalty discounts to customers who pay early
This is the simplest and most common way for businesses to increase the speed of receivables. And it doesn’t have to be a large discount. It can be as little as 2%. If you usually bill with net 30 terms, consider billing with -2% 15, net 30 terms; meaning if your customer pays within 15 days, they receive a 2% discount. Even though this will be a slight hit to the bottom line, it will improve your business’s cash flow, helping fuel growth.
This isn’t an absolute. Some businesses have their products and services priced too high or to perfection. However, you wouldn’t know the answer unless you changed price points to see which were best received. You may be losing sales because you are priced too high. You may be leaving money on the table by pricing your products and services too low. (For more, see: Free Cash Flow vs. EBITDA: Which Should You Analyze?). Either way, by fine-tuning your pricing you might be able to either increase sales or increase profit, which leads to improved receivables and additional cash flow.
Ask for deposits
When a customer decides to make work with you, be it a medium or large job, it is not uncommon to charge for a deposit. You will need the resources to plan for your materials, crews, and fees. By adding payment deposits to all sales, cash flow will see a big boost.
Communicate and negotiate with suppliers
If you establish a good relationship with suppliers, they will be more likely to negotiate with you on payment terms or payment date changes. Also, negotiating your supplier pricing on an annual contract will help you secure the best pricing, which improves your profitability per job.
Give customers the ability to pay online
The average invoice takes $17 and 10 days to process — in fact, the entire lifecycle of a transaction stands at 34 days in the U.S. market. Can you afford to wait that long to get paid? A digital payment solution will cut your billing cycle, and funds will be deposited in your account much faster. An example would be for insurance claims. By allowing customers to pay the final portion of their claim online, you will save the time of physically collecting payment, and you can focus efforts on other claims and customers. There is an added bonus for customers who prefer to use corporate credit cards with reward points. These are substantial transaction amounts, and getting those bonus points or miles or cashback is a great incentive for your customers.
As part of our continued efforts to enhance the experience of our users, Contractors Cloud has partnered with BASYS Processing for fully integrated acceptance of credit and debit card payments. It’s a seamless experience inside that allows for you to send invoices and get paid faster.
Essential benefits BASYS provides:
- Comprehensive PCI (Payment Card Industry Security) Compliance support
- A knowledgeable representative assigned to your account
- Flexibility to meet your business’s needs
Business magnate Richard Branson said, “Never take your eyes off the cash flow because it’s the lifeblood of business.” This sentiment rings true, given that 82% of businesses who fail to cite cash flow problems as the reason they closed their doors.
If you want a healthy business and are ready to improve your receivables, BASYS Processing can help. To learn more about BASYS Processing solutions, click here, or contact us for a free savings analysis.
* portions of this article originally appeared on investopedia.com.
Last Updated on January 21, 2021.