Wouldn’t it be nice to have a more robust cash flow? Here are some ideas for speeding up payment and building your bank balance.
Institute a credit policy
A credit policy a guide for making the decision to extend credit to a customer and its purpose is to avoid extending credit to customers who are unable or unwilling to pay. Unfortunately, many accounting firms don’t use even the simplest policy even though it has a direct bearing on cash flow.
Set the price up front
Make sure your client knows how much your services cost. Clients don’t like getting bills for more than they expect and are likely to put them aside for more consideration, thus paying you later. Also, a peeved client may be thinking about not paying at all if they don’t feel they received adequate services.
Send out bills and statements promptly
Seems obvious, but send bills and statements out regularly and quickly. It’s easy to get caught up in all the other aspects of running a firm and put off the billing. Consider sending bills twice monthly so they arrive closer in time to when the services are rendered. People quickly forget and are more likely to pay when the memory of the great things you did for them is still fresh.
Oh, and for individual tax preparation, establish a payment system so clients can pay when they receive their return. I’ve run across situations where firms didn’t prepare the bills with the returns and there was no provision for accepting payment. That’s asking to not be paid!
Follow up on overdue accounts
Sending a letter is the easy way out. A phone call usually works better especially if it’s from someone with authority. Be polite, be nice, be understanding, but be sure to let the client know that the bill is due and must be paid. Handled properly, this usually results in payment. If not, go ahead and send that letter.
Cut off overdue clients
This is the last resort and one many firms avoid, even to their own detriment. If a client owes you for past services and is overdue on payments, don’t continue to work for them. You’re essentially working for free and that’s not a good business model.
When you’ve made the decision to stop work, let the client know and explain to them what it will take to remedy the situation. You may be happy to continue with them if they bring their account up to date, or you may be ready to discharge the client for habitual non-payment. Either way, be honest, upfront and professional with the client.
Yes, tax time is on us, but more cash is always in season. Try to squeeze out a little time for some of these tips and let me know how that works for you.