In the last 3 articles, we have looked at and dealt with the fact that there are only 3 reasons why you will find yourself in a cash flow crisis. To remind ourselves, there were:-
1. You’re not making enough money.
2. You are not getting your debtors to pay you and
3. You are spending too much money!
We also looked at the first step that should be taken and that was to get clarity on what you owe and what is owed to you and we did this by means of a debtors and creditors ageing analysis.
Then we looked at cutting costs, discussed putting a budget together and then making arrangements with your creditors to pay what you owe.
This time we continue with some things that you can do immediately to help alleviate the situation.
Remember in part 2 we discussed the importance of knowing exactly what you owe and what you are owed.
Now it is the turn of your clients who owe you money (or your debtors as they are known) to get sorted.
This is where you have to use every single communication medium that you can, to communicate with your client. So you can phone, or e-mail, or SMS and even ‘WhatsApp’ them or use all the different types of social media communication to contact them. You see, you have to communicate with them and continue to do so until you have been paid in full.
It’s always a good idea to make notes on who you have spoken to, mailed, sms’d etc. Record the date and time, who you spoke to and what was said. If for example, they said that they would pay on Wednesday the 12, make a note to remind them that they have promised to make a payment. When they pay, contact them again to a) thank them for making payment and b) to get a commitment for the next payment. If they don’t pay on the due date, of course, you need to contact them to a) find out why they did not make a payment and b) to get them to make another commitment to pay. Be friendly but firm in your dealings with them and make them understand that they do have to pay and pay sooner rather than later.
For the money that has been outstanding for a long time (for me that is anything over 60 days, but you need to make this decision upfront), the reality is that you have to take the emotion out of the situation and get tough with yourself. Hand them over to the attorney for collection. The reality is of course that many of them are in all probability, dealing with their own cash flow problems. So being empathetic with their plight will stand you in good stead. That said though, you still have to deal with your own cash flow crisis – so get them to pay up, or hand them over.
Finally, for today’s lesson, remember that you cannot expect your clients to pay you or be honourable with you if you are not being honourable with your suppliers. You need to do to others what you want done to be done to you!
Be honourable yourself. Let your words be congruent with your intent and as your receive, the money payout what you owe – even if it is before the due date.
Next time we will look a bit more in-depth at how to take back control of your “in crisis” cash flow.