Five Tips to Speed Up Cash Collections

If your accounts receivable balances are edging up and getting older and older each month, then it might be a good time to bring out the aging reports. But what if we looked earlier in the cycle to see what we could do to collect the sales even sooner? Let’s take a look at five potential changes you can consider making that will speed up your cash flow, reduce aging receivables, and possibly reduce lending costs in your business.

1. Get paid in advance.

Getting paid in advance manifests itself in a number of ways:

• Prepaid gift cards
• Deposits
• Prepayment plans
• Monthly or project retainers

If it’s common to get paid in advance in your industry, then all you need to do is focus on doing more of it. If it’s not common in your industry, I encourage you to see how you might apply one of these ideas to your industry. You may be able to invent an entirely new way of doing business within your industry.

2. Increase your cash-equivalent payment choices.

If you’re not already able to take the following forms of payment, then it’s time to sign up for:

• Credit cards, especially MasterCard, Visa, Discover, and American Express
• PayPal
• Wire transfers
• Cloud-based bill payment systems

If you have overseas clients, being able to easily accept wire transfers keeps it simple if the client does not maintain a bank account in your country’s currency. And although most wire transfers still need to be handled manually, you can systematize and automate the process as much as you can by having written procedures for your clients.

Offering a cloud-based billing solution such as Bill.com eliminates the physical writing of checks, and you can approve and send payments from anywhere, even if you are on an airplane. The efficiency cannot be beat.

It’s surprising how many business-to-business payments come through PayPal, so if you don’t have this one as an option, you might want to consider it.

3. Streamline your time and billing system.

If you can bill faster, you can collect faster. Take a look at your processes and identify the bottlenecks in your billing system. Is it the partner who keeps the invoices on their desk for days before they are approved to be mailed? Is it an antiquated time system that is not real-time? Is it duplicate data entry that can be streamlined? Once you’ve determined your bottlenecks, you can take action to eliminate them.

4. Implement eCommerce.

An online shopping cart can help clients serve themselves and cut way down on your customer service. Today’s online shopping carts can handle one-time payments, recurring payments, and variable bills. The best of them offer a portal for clients to update their own credit card expiration dates, respond to declined card messages, and basically serve themselves. It’s quite fun to come into the office each morning and find loads of cash sales already in your cart from the night before, without any help from you or your staff.

5. Card on file.

For long-time clients, it makes sense to set up automatic approval on a monthly basis by having their card on file. Most busy and successful clients will appreciate the time savings when using this method, and you will have more control and be able to get paid faster. You can also use a hybrid of this method – semi-automatic approval – where a simple email exchange approves the current month’s amount.

Try one or more of these five tips to speed up your cash flow, simplify collections, and lower the amount you need to borrow from the bank to finance your business.

Russian Roulette, er, I Mean Bookkeeping

The main square in Yekaterinburg

The early snowstorm in the Northeast a few weeks ago reminded me of the city of Yekaterinburg, a large city two hours east of Moscow by air that often sees snow in October all the way through May. The western border of Siberia is a few hundred miles to the east. In Yekaterinburg, there are many small businesses whose owners need to keep their accounting books just like you do. However there are a couple of twists as you might imagine.

The old Russian accounting system was built for one purpose: to calculate taxes. And the tax system is complicated, expensive, and volatile. In the 1990s, about 600 new laws were published every year (just in case we think U.S is the only country that has a crazy tax system). The Russian government has broad powers to garnish business accounts, and many transactions are handled in cash to avoid this capability.

As a matter of fact, it was quite common for small businesses to maintain three sets of books:

• One “official” set of books for the government.
• One for payroll which was mostly done in cash.
• One for management to see what was really going on.

It’s interesting to see whether QuickBooks could handle such data requirements.

At any rate, it would need to be QuickBooks in Cyrillic to support the Russian alphabet. Microsoft Excel is definitely available in Cyrillic; I’m not sure Intuit has any plans for a Cyrillic version any time soon, which brings up another challenge: there are not too many plug and play accounting systems available in Russian.

Another challenge in the new, turbulent post-perestroika economy -- inflation. Lending rates ranged between 130% and 200%. That’s pretty brutal to profit margins. What's worse, a loan has to be paid back in three months. A company needing cash for several months is forced to find a new bank every three months to pay off the old loan and lend it the money for the next three months.

Until 1992, Yekaterinburg was a closed city: No foreigners were allowed to visit for reasons of national security. Concepts that we take for granted in America, such as profit and efficiency, are relatively unknown in Russia. There is no Russian word for “efficiency.” Imagine describing efficiency to an employee who has never heard of the concept or the word.

The chief accountant, who is often a company officer, is usually educated as an economist, which is the closest profession that Russia has to accounting until recently. There is a great hunger for management accounting and reporting because there wasn't anything like it.

Sometimes it’s a breath of fresh air to experience a new perspective. In the U.S. we don’t have to keep three sets of books; one is quite enough for most of us. It’s illegal to make payroll in cash in most states. We have about half a million CPAs and far more bookkeepers to help us with anything we don’t understand. Most of them are quite efficient, and that’s a lot to be grateful for.

If we can help you with anything that feels foreign to you in your accounting system, please call on us anytime.

Six Ways to Reduce Fee Resistance

Do your prospects sometimes balk when you quote your prices? Do you feel you’re losing business because your fees are too high? The problem might not be your prices; it might be the way you’re presenting them to potential clients. Many business owners blame a lost sale on price, but only a small percentage of customers are truly price-sensitive and will make a decision based on price alone. That means the majority of the market buys on value, not price, and that’s what we need to move the focus to when we present prices.

The following are six ideas to help you reduce fee resistance and possibly even raise prices without receiving objections about your fees. The overall key is to reduce the prospect’s risk of doing business with you while increasing the chances that they will look like a hero after they have hired you.

1. Acknowledge their fear or skepticism.

If your client has just had a couple of failures with other vendors, lost some clients, or laid off staff, he is going to be defensive and skeptical about any proposal that has him spending a large amount of money. The last thing he wants to do right now is make a mistake hiring the wrong vendor.

The first step for you is to see the world from your buyer’s eyes. If the budget is tight, you have to acknowledge this elephant in the room. Show them how your service or product can reduce their pain and fit in with their current situation. And show them where it falls short, if it does. Being honest goes a long way and reduces defensive behavior on the prospect’s side.

2. Build vision.

Work with the prospect to see the vision of their problems solved. Staying at this high level will allow you both to communicate the big picture and avoid getting lost in the details.

3. Gain buy-in before you write the proposal.

“If we can deliver this, does this sound good to you?” is the type of language you want to use during the initial conversations. As much as you can gain buy-in at every step, do so. This will allow you to keep one eye on where your buyer stands emotionally as well.

If the answer is “no” to the above question, then you have saved time in the proposal stage. Don’t write the proposal until you know what should be in it that will be accepted.

4. Give your prospect a choice of YESes.

In your proposal, create three options: a small, medium, and large, if you will. This reduces your chance of getting a “no.” Your buyer has a choice of YESes to make instead of a yes-no decision.

For example, a trainer’s small option might be two train-the-trainer sessions, 500 licenses, and no instructor manual. A medium option is two train-the-trainer sessions, 1,000 licenses, an instructor manual, and email support. A large option is four train-the trainer sessions, 2,000 licenses, an instructor manual, two days of onsite support, and email support.

5. Use value words in your conversations, materials, and proposals.

When possible, use words like “investment” instead of “expense.” Also watch your ratio of “you” statements to “I/we” statements. Always use more “you” statements than “I/we” statements. List items you will be doing that are included in the fee and list them in the fees sections as “No charge” or “Included.”

6. Compute ROI.

If you’re dealing with larger accounts, calculating return on investment is pretty much mandatory. Estimate the value of the problems that you will be solving for them, and compare it to the cost of your service. There should be at least a 10 to one ratio, in favor of the prospect.

Include a per person component, if applicable. Your fee might sound high in total, but when you spread it across the number of individuals you will be impacting, it can sound really low. For example, a $20,000 training fee spread over 5,000 participants is only $4 per headcount. Let us know what numbers you need to make your marketing presentations complete. We can work with you to compute the number that communicates your value in the most informative way.

These tips will not only help you get what you’re worth, but they will increase your value in the eyes of the client, resulting in a more satisfied client.

Are You an Expander or Contractor?

Are You an Expander or Contractor?

As business owners, we naturally lean toward being an expander or a contractor in our businesses. In a nutshell, an expander makes things bigger and a contractor pulls things in, but there’s far more to this analogy which can explain a lot about what roles you want to have in place in your business.

The expander is a salesperson who can bring in the business and maintain good client relationships. An expander is a person who has a million ideas and can create profitable new service and product lines, but may not be best at implementing them. An expander will also tend to spend a lot, go over budget, and start a lot of projects.

A contractor is great at staying on budget. They love systems. They will create rules and systems and follow them. They are not natural at selling. They might be introverted. They are great implementers. They can rein in an expander’s ideas by encouraging them to choose one. They can implement it and see it to its finish.

Which Role Do You Play?

It’s fun to think about which role you naturally play, and which roles your team members naturally play. There may even be some tension between the team members who are opposites, but when they can play well together, your business will flourish. To succeed effortlessly in business, you need both types of roles in your business – an expander and a contractor.

Challenges for Expanders

If you’re the business owner and the expander, the challenge for you is finding the time and discipline to do the work as well as keep up with all the marketing. You might feel the pull of that seesaw between delivering services for clients versus going out and getting new clients and keeping your business full.

If you’re in business alone, the first person an expander business owner might want to hire is a contractor type – a project manager type or an admin type that can help you offload some tasks that you can systematize and delegate. Your biggest challenge is time. You need help to get all your great ideas done. Choose an admin person at a low hourly rate that will do the lowest level tasks on your plate. This will free you up to do the higher dollar stuff you need to do with clients and to do the strategy work that no one else can do in your business. Another way an expander can bring a contractor role into their business is through coaching or a mastermind group that can hold them accountable.

Challenges for Contractors

If you are the business owner and you are a contractor, you love doing the work but hate going out and getting clients. You are introverted, maybe a numbers or rules or systems person. You might dislike marketing and avoid doing it. Your biggest challenge is getting enough business in the door. The first step you can do is to leverage online marketing as much as possible. Systematize your marketing so that it’s as automated as possible. You can also employ a strong support team of expanders in your business to help you. Find a fabulous employee that has client service, sales and marketing experience that can be your expander.

Your Business Roles

You will easily be able to tell if you have too many of one role in your business. In an all-expander business, client projects can run over-budget which hurts your margins, important initiatives may not get implemented, and details can get overlooked. In an all-contractor business, you do great work but you are a best-kept secret and you may fall short on revenue goals.
Take a look at your business roles. Are you naturally an expander, or does your business have too many expanders? Are you naturally the contractor, or does your business have too many contractors? Let us know how we can help you keep your business in balance.