6 simple strategies to win the hearts of your customers this Easter
No cashflow. No business. In part two of our two-part guide, we ask cashflow expert Tim Hoopmann and some successful SMEs how to get it right.
About half of small businesses won’t make it past the three-year mark, according to the Australian Bureau of Statistics.
In the last financial year, almost 80 percent of those going under were small businesses according to the Australian Securities and Investments Commission (ASIC).
Cashflow management the pain point for SMEs
According to ASIC, “inadequate cash flow or high cash use” was the main cause (40 percent) followed by poor strategic management (42 percent).
Cash flow management was also one of the biggest challenges facing small businesses interviewed for the latest DFA Small & Medium BusinessSurvey, which noted that 57 percent of all business borrowing was for working capital.
The survey of 26,000 businesses, with turnover of less than $5 million, stated extended payments terms and late payments was hurting them most. With average debtor days dragging out at between 50 and 60, managing cashflow was easily the main pressure point for SMEs.
We have already outlined three key areas you must address.
1. Make a cashflow audit and projection
2. Make it easy to get paid
3. Update your technology
Read on for the second part of our two-part guide.
4. Get paid immediately
Are you invoicing on delivery or monthly? The difference could add (or subtract) thousands of dollars to your bottom line each financial year. Better still, ask for a deposit (particularly on large or special orders). The less time you are out of pocket, the better.
Hoopmann said be upfront early about your terms of trade.
“When you engage a new customer, be clear about when you expect to be paid and stick to it. If you are clear upfront, it makes it easier down the track,” he said.
“Our business is a little different to others. We offer a monthly service, so we send out our monthly accounts on the first or second working day of each month. This also helps our customers budget their outgoings.
“If you value your work, the customer will. If you let your invoices slide a few months, even into the new financial year, you are inviting customers to make it difficult to pay. They will complain about your fees.”
Here are few tips to get paid quicker:
- Invoice on delivery.
- Offer incentives if they pay early.
- Establish a process to chase up outstanding payments which may include debt collections. (See below.)
- Establish a process to resolve disputes that could delay payments.
Debt collection template forms: Find it here.
5. Get the best deal from suppliers
Price comparison sites are the norm these days. Want to get a good deal on a mobile, car insurance, or a TV? There’s a site for that and your customers are well aware of it. So why aren’t you doing the same as a business owner.
You are the customer to your suppliers, whether it’s for inventory, utilities, or the lease on your EFTPOS terminals, so start acting like one. Hoopmann said managing your suppliers means more than understanding their payment terms.
“Firstly, see if they are still relevant for your business. If they are, then you should regularly review their services and provide feedback which may help in managing increasing costs in the future,” he said.
Here are some questions to ask:
- What’s my discount for prompt payment?
- Can I get credit terms rather than cash or deposit?
- What happens if I miss a payment? Would they repossess my equipment?
- Can you match your competitor’s best rate?
- If I order more, what discount do I get?
- Can I get it same day rather than weekly?
- What manufacturer’s warranties comes with your product?
- What’s my discount if I bundle one of your products with another of yours?
Read part one of our Five-step guide to a killer cashflow.