Do you have a small business and are looking for cash to keep it growing? Or maybe your cash needs are even more simple than that: you need money to pay the bills.
Whatever the reason, there is one thing that’s certainly true in the best and the worst of times: Cash is King!
I’ve been around long enough to see all kinds of economic cycles. And through it all, there is one thing I can guarantee: the small business owner who has good resources and a determination to get through whatever the economy or business climate throws at him will succeed. I love working with small business owners who have that kind of gritty determination and that’s why I’m excited to give you a few strategies to help you out.
Be Careful You Don’t Turn Into a Bank
If you have a service related business, chances are you also have to carry your customers. You do the work for them, present them with a bill and then you have to wait to get paid. If this is your current way of operating, then you’ve probably seen that your clients are taking a longer time to pay you. The credit market has gotten tighter, so they’re now counting on you to finance them by carrying accounts receivable. Accounts receivable is the amount that they owe you.
Get Signed Up With a Merchant Account
If you don’t currently take credit cards, get a merchant account and start doing that right away! You can often get a credit card on the spot for a payment and that could save you a lot of trouble down the road.
Start Collection Efforts Right Away
Most people wait too long to collect the money due them. In fact, real collection efforts often don’t start until the amount due is over 60 or 90 days. By then it’s overdue. Studies show that the longer you wait, the less chance you have of collecting. Put your emphasis into collecting within the first 30 days. That’s when you’re more likely to actually get paid.
REMINDER: The 53 Strategies for Creating Cashflow Quick is on sale for just $69. You’ll get both the CD version and immediate download for this one low price. The sale will last just through the end of this week. Learn more about these and other strategies to jumpstart your business’s cash flow.
Discounts for Early Pay
Give discounts for payment in the first few days. I have a vendor who sends me statements with a discount if I pay in the first 10 days. But the offer is in print so small, it’s hard to see. It’s almost like he doesn’t want me to take the discount. If you’re going to offer a discount – put it in LARGE LETTERS right on the face of the bill.
Most people who carry accounts receivables for their customers send out monthly or maybe quarterly statements. If you’re doing that, consider sending out the statements every week. The more frequently you are in front of the person paying the bills, the more likely you are to get paid.
Mail Your Invoices and Statements EARLY
Here’s a trick that I used back in the days when my CPA practice carried Accounts Receivables. Make sure your invoices and statements are in your client’s hands well before the end of the month and before the 15th. Most companies pay twice a month, often mid-month and the end of the month. If you wait to mail out your invoices on the day that they pay, you’re not going to get paid until the next cycle. When I started sending out statements and invoices just a few days earlier, my average time to collect increased by at least 2 weeks. That’s a pretty significant change for such a small effort.
Those are just a few of the ideas that are in 53 Strategies for Creating Cashflow Quick for collecting accounts receivable.
What if your problem isn’t collecting on what people owe you, but instead is lack of revenue? There are three ways to get more sales:
(1) Sell to more people, (2) Sell more to current customers or (3) Increase your prices.
Let’s look at a few ideas for that as well.
How can you sell to more people?
We have moved from Industrial Age to the Information Age and that has caused a shift in how we make money in business. Marketers used to talk about the Bell Curve in business. If you had products that cost $50, $100 and $200, you would sell twice as much of the $100 product if your Bell Curve was correctly priced. People bought at the middle. That was the Industrial Age marketing curve.
We’ve now moved to what is called the bi-modal curve. Picture a 2 humped camel. There is a bell curve on the left and a bell curve on the right and a valley in between. That’s the current marketing curve. The middle has collapsed. If you’ve been in business for 20 or more years and are experiencing downturns you’ve never seen before, chances are this is what has happened to you. The middle has collapsed.
The new bi-modal curve means that there are people at the left who want free or almost free. They are price shoppers. They are motivated by the idea of scarcity. Your competition at this level is the Internet. You have to price things so that it becomes an almost no brainer, because the Internet is going to create competition like you’ve never seen before.
At the other end of the bi-modal curve is the shopper who wants personalized, customized solutions. They want to be treated like they are special and want to know that you know they are unique. They’ll pay for that service too.
The middle is gone. Most service providers will target the high end, but not the low end. If that’s your business right now, what can you do to offer a low end solution? Maybe you have information that you can package and sell at a small price? Is there a way to take something within your business and make it more assembly line or do-it-yourself so that people can get it much much cheaper? The key here is to keep your costs way down and your time commitment, other than setting it up, at an absolute minimum. You want to automate.
On the other hand, if that’s the side that you’re currently operating at: How can you create a customized high end solution? Or maybe you don’t want to be the one creating that solution. How about finding someone who already does that and then set up to refer new clients to her for a referral fee? You can then position within your specialty to attract both ends of the curve.
This is an area that I get excited about. In fact in 53 Strategies for Creating Cashflow Quick you’ll heard a bunch of ideas and stories of how I’ve done this with my own businesses and helped my clients do the same.
Drop me a note and tell me how your business is doing in this current economic time. You can reach me at Diane@DKTaxServices.com or through Twitter at www.Twitter.com/DianeKennedyCPA.