You’ve got a great business. You provide first-class service and products to your loyal clients, who come back again and again. Sales are up up up, and you’re way over your projected targets for this year. So, why haven’t you got any money in the bank?
Is your business subsidising your clients’ profits at the expense of your own? How often do you get to month end, and have to juggle finances and top up your business account to pay your staff? Or pay your taxes?
Take heart, it’s a familiar scenario for many businesses. On paper your finances are very healthy and growth is good, but in reality your growth is hampered by your debtors. The market is competitive and in order to win and keep customers you must also charge for your services competitively, and do so in good faith; always assuming that your clients will pay promptly. You, and even your staff often put in several hours of effort a week towards chasing late payments, which is unpleasant and can damage your relationship with your clients (you have to bring up the tricky topic of money which can spoil your discussions of the exciting developments and progress of your projects).
If this sounds like you, then you need to stop and consider: How much is this really costing my business?
Look at your aged debtors list – how much do your slow paying clients owe you? If you could rein in this money would it solve the problem? Also total the working hours that you and your staff spend chasing these payments each month. How much are those ‘working hours’ worth to your business growth? Could they be more profitably spent – marketing, sales, product development?
Remember cost is not just about cash – think of the value of your client relationships, and your / your staff’s morale. It’s damage all over! It’s time to overhaul your systems and develop a smoother way to get that cash coming in.
Read our countdown to smooth cash flow for help: