So, you made the sale and provided the goods or services. Job well done. Actually, not yet..
The job is only complete when you have received the money for the service provided or the goods delivered.
So how does the process work?
Business relations are built over a period of time where a client creates a reputation in terms of the ability to honour its obligation towards the service provider.
Good customer and supplier management will ensure that you have sufficient cash flow to be able to pay your creditors (the people you owe money to i.e., your suppliers).
Then you have your debtors (the people who owe you money).
It is however important to make sure the debtor understands the payment terms of the outstanding amount due. Payment terms are normally specified as on presentation of the invoice, at the end of the month in which the invoice is issued, or 30 days after the date on which the invoice is issued.
Ensure that your payment terms are clear as this will reduce any payment disputes later.
Usually once-off clients pay on presentation of the invoice.
In some cases, it is advisable for clients to pay 50% upfront, as in the case of projects like construction, which allows the supplier to purchase the building material without it affecting the cash flow.
In today’s uncertain environment these accounts must be monitored and controlled closely.
Cash flow management (the movement of money in and out of your business) is very important, as it ensures that you always have sufficient funds available to pay for expenses, both planned and unplanned.
It is therefore very important to issue your invoices as soon as the work is completed so that the customer can pay on time, and so that you in turn, can pay your accounts on time.
Where possible, automate your debtor recovery process.
A lot of software today, will automatically send out reminders on invoices that have not yet been paid.
If your software does not have this feature, you can easily track payments with good spreadsheets and keeping your finger on the pulse.
Either way, it is important to send out regular reminders in the form of statements and/or text messages to debtors and in some cases follow up with a phone call.
Debtors accounts need to be kept updated to enable you to project future cash flow and plan for the unexpected.
So, build those relationships with your clients and create a culture of timely payment.
TLOK is in the process of moving over to new software that will provide more visibility in projects and client tasks, so expect to see a few changes in the next couple of months.
We believe in adding value to our clients and assisting them wherever we can.