You can develop a product or service and get a client, but if you don't get paid for it, you will go out of business. It may seem obvious, but managing cash is one of the biggest problems facing small and medium-sized businesses and entrepreneurs.
- Acquiring clients/customers
- Being able to deliver the product or service
- Collecting the money
So many entrepreneurs are so focused on No. 2 and afraid of No. 1 that they forget about No. 3.
Manufacturing. Service. Distribution. The old-fashioned companies in this country that you can't buy via the App Store. You provide a product or service, and in return, a company or individual pays you for it. Could be via credit card, by check, or maybe even cash. There are many problems small and mid-sized companies face and getting paid is one of them.
It's hard to be good at sales. It's why great salespeople can earn so much money. Notice I didn't write make. I wrote earn. You make a salary, but you earn commissions and a bonus. Subject matter experts who become entrepreneurs don't always like to sell, so they focus on their service or product as it's a path of least resistance emotionally.
When new clients come in, people are so excited they often forget about collecting the money and in what form (credit card, cash, check, etc.). It could be that you don't want to scare the potential client away, or you think that money in 60 days is better than no money at all.
Cash flow is crucial to growing a business. You must get a focus on collecting your money. If you have an accounting department, part of your weekly or semi-monthly meetings has to be focused on collections. Not just what the aging looks like, but what the process is. Remember, your clients are managing their cash as well, so they may try to push out payments for their own financial reasons.
If you don't have an accounting department and you either outsource or do it yourself, then you must allocate time in your week to do collection calls and emails. Notice I wrote and, not or. You must show them there is a person at the other end of the relationship, and it's important. You need to build a relationship with whomever pays the bills for your client. Maybe it's your contact, maybe it's their accounts payable department, maybe it's their CFO...who knows?! But you need to find out.
When you approach collections with a process and like it's a necessity, you will get what you've earn on a timelier basis. You won't worry as much about cash flow, and you will sleep better at night. And your banker will like your aging!
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