If your bank account is constantly short on cash, then today’s Virtual Strategy Session is for you.
Last time, we talked about how to build a turbo-charged sales team. Your assignment was to begin to train sales staff on developing a winning attitude and to determine the right mix of activities for increased results.
Today, I am going to help you eliminate those “feast or famine” cycles that afflict far too many businesses by helping you reduce your CASH GAP. While thinking about the simple strategies below, remember:
YOU DON’T GET WHAT YOU DON’T ASK FOR.
There are three critical yet simple steps you need to take:
- Establish Shorter Terms with Your Customers. When you’re negotiating contracts with your customers, collect as much cash up front as possible, and then reduce payment terms. Even if you cut terms by just a few days per contract, you will be amazed at how quickly those days add up across your entire company.
- Get Customers to Pay You Faster. If you are like most business owners, you have too many customers who owe you too much money at any given point in time! Don’t settle for late payments and outstanding balances. Collect more cash, faster, by implementing the following principles:
- Collect payments automatically. If possible, take an automatic draw from a customer’s checking account or credit card each month or over the term of the contract. Give them a small discount on their order if they agree to this arrangement. Always automate when you can! Automation = saved time.
- Implement a systematized collections procedure. You need three letters or emails to enforce your contracts and encourage prompt payment. First is a “friendly” payment reminder that should go out when the client is one day past due. Next is a “formal” reminder sent when the client is one week past due. Finally, send a “harsh” reminder when the client is 14 days past due.
- Thank customers when they pay on time. Positive reinforcement goes a long way! When a client sends a prompt payment, THANK THEM. Simple, right? Not only does this remind them that you are on top of the situation, but it makes them feel good to be acknowledged and appreciated. And, it differentiates your company and its image from 99.9% of your competition (without costing you a cent)!
- Negotiate More Favorable Terms with Vendors. This is NOT about cutting your suppliers’ margins – but is, instead, about creating real win/win relationships. Make a list of your most important suppliers and pick up the phone. Ask them to lengthen their terms. The longer you have been doing business together, the more likely they’ll be to work with you. If necessary, have a list of back-up suppliers to whom you can turn if your negotiations prove fruitless. My clients often say, “My vendors won’t give me additional days for payment terms.” Well, I bet they didn’t ask! If you do not at least ASK, you definitely won’t GET!
Make a list of the specific improvements you want to implement in each of the three steps above, to close the cash gap, and then take fast action! If you are unsure where to start, reach out to me. I would be happy to walk you through the entire process. You can call me direct at 506 872 2900, send me an email, or CLICK HERE to book a FREE 30-minute appointment to discuss anything you’d like more information about.
In the next Virtual Strategy Session, I will teach you how to cut costs on your way to improving your gross margin.