Learn how to help your business survive and thrive by understanding your numbers. I really hate not getting paid on time without good reason. This episode is about what we can do to get people paid on time.

Why is paying on time important?

If you don’t pay on time, you are going to have people knocking on your door. The cash generation part of your business is your customers.

Policies

Don’t get sidetracked. Make sure you do your due diligence on the customer. If you can do a background check, do it. Make sure your customer knows what your business terms are. It’s important to communicate that clearly.

30 percent of business don’t communicate their terms from the start. Make sure you establish those guidelines from the very beginning. Also make sure you portray to the client that you take your credit terms seriously.

Tracking

If you give a customer an invoice, you need to keep an eye on it. What is your follow up strategy? Have a system in your business that records, when, who and how much. At the end of the week, make sure you are looking at all your outstanding customers.

There is an inverse relationship of how many clients you have and who still owes you money. Bigger doesn’t necessarily mean better. If they are not paying on time, really consider how that is impacting your business.

Being Consistent

Don’t differentiate thinking I like this person and I don’t like this person. Have a consistent system that you apply across the board. A business is a business. The longer you wait to be paid, the more likely it is you won’t get paid.

In This Episode

• Keeping cash flowing
• 
  
• Maintaining a positive relationship and getting paid
• 
  
• Policies
• 
  
• Tracking
• 
  
• Consistency
• 
  
• Tips and tricks

Links

https://www.proactiveresolutions.com/

https://www.linkedin.com/in/proactiveresolutions/

https://www.instagram.com/mahmoodnumbersrockstar/

https://twitter.com/mahmood_reza

https://www.facebook.com/proactiveresolutions/

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks, and welcome to episode number three of I Hate Numbers. I can't believe it's episode number three. Thanks for your company in the last two podcast episodes, and thank you for lending me your earlobes for today's episode. Now, I'm not a big fan of the cold. Don't really like it. I'm not a big fan of fruit on pizza, even though it might be some of people's bags.

But the one thing I really hate, I really hate not getting paid on time without good reason. So, today's episode on I Hate Numbers podcast is about what we can do to try and get people to pay on time. Now, fundamentally, why is it an important thing? Well, if you don't get paid on time by your customers, your clients, well, you're still going to have people knocking on your door saying it's paying-your-bills time there as well,

and that money, that cash has got to come from somewhere. You can certainly dip into your savings if you've got any. You can certainly borrow money. You've all got to pay it back at some point, but ultimately, the cash generating part of your business is your customers. So, I'm going to share with you a little mnemonic here PTC that summarises what we can do to try and get our customers to get their act together and to keep that money flowing in and to keep those business rules

going. Now, the P is about policies. So, policies, for me, it's not just about documentation, what you're writing out, it's about your whole approach to your credit terms as such. It's the culture that you exhibit and customers pick up that vibe in terms of how you behave, how you deal with them in terms of whether they think you are going to be relatively okay for bending your credit rules or whether they need to take your business a bit more seriously.

Certainly, outset when we're very excited about the opportunity of doing business with a client. Don't get sidetracked. Don't let your personality be swayed by the facts of that you got the opportunity here to sell stuff into people. Make sure you do your due diligence. So, check out the customer if you can.

If it's a customer that you can do a credit check on worthwhile doing a little bit of background checks on that customer. Make sure your customer knows what your terms of business actually are. So, if you say to them your business terms are, say, 21 days from the day you do the work to giving them that invoice, make sure you communicate that clearly.

A lot of business owners still, I know and I think the stats is around about 30 odd percent of businesses don't actually communicate their credit terms with businesses at the outset. So, you take on board a new client. You are really sort of excited by doing work for this client here. You might be a little bit nervy about here.

Even if it is a basic email, when you summarise the conversation with the client, you say, great, thanks very much, we're looking forward to working with you guys, and our terms of business are X number of days from the day the invoice is done. Make sure that's communicated. Get that upfront. If somebody doesn't want to do that, doesn't agree with it, then the warning sign should go on.

Walk away from that. Doesn't matter how big the business is. If you think actually businesses are less risky than individuals, you might think bigger businesses are okay. They've been in business a long time. You don’t know what goes on behind the scenes here. So, again, effectively, you need to make sure that you apply that at the very beginning.

The culture part of it, we're going to pick up again when we talk about what we do going forward if a customer doesn't pay, you've got to make sure that you actually exhibit that appearance of actually, yes, I'm going to do a great job for you, but also I take my credit terms seriously. At the end of the podcast, I'm going to share a couple of tips with you,

by the way. If you are not that comfortable having those conversations with the customers, what can you do to maintain a real positive relationship with somebody and still get paid for it? And remember, if that customer turns out to be very naughty, it's not paying their bills, then you've got to make sure in your own mind that you still want to work with that customer.

The next part of the approach to getting paid on time is about tracking and we're not talking about any David-Crockett-type thing here. We're talking about if you issue an invoice out to a customer, you need to keep an eye on it. So, if you've given them 21 days in which to pay their bills, then once 21 days is expired,

you know, what's the follow up here? So, you need to keep a reminder. You need to send it out to them. Have a system in your business that actually records when the invoice goes out, who it goes out, how much they owe you, what the terms of business are, and then once those days elapse, you need to make sure that you follow up accordingly.

Most apps these days, most software systems that enable you to generate an invoice, get the invoice together, describing what you've done for them, send it out there electronically or otherwise. My personal preference, electronic tends to be a much easier way of doing these things and keeping an eye on things.

At the end of each week, I will suggest that you have a look at all your outstanding customers. Have a look at them. If there are good reasons that they've communicated to you and you've agreed for not paying their bills or time, great. If not, you need to pursue them. Typically, over the years that I've found is there's an inverse relationship between the number of customers that you've got and how much they owe you.

So, typically you'll find that 80% of what's owing to you comes from a very small cohort of customers there as well. Bigger doesn't necessarily mean better by the way. So, you mustn't get into the idea of thinking, oh, I mustn't upset this particular customer because we do a lot of business with them. If they're not paying you on time or they're not likely to, and you've had issues with them, you've got to think to yourself, well what about the stress it's putting in my business.

Can I afford to pay out those bills or I'm waiting for that customer to pay them? And there is the very real possibility the longer you leave it to pursue that and get the customer paying their bills on time, the greater the likelihood of them effectively going belly up, not paying their bills on time, and you've got a massive situation on your hands.

Now, the third thing is consistency. Now, again, I don't always follow my own advice, which is very naughty, which is probably what a lot of advisors do. I do. Now, I have my credit control taken care of internally, but don't differentiate thinking, oh, I like this person, therefore I'll give them credit. I don't like this person.

I'll be a bit more bullish. It's going to be a consistent system that applies across the board. So, what that means is once the time has elapsed by which you should get paid automatically or pretty much human intervention, get those reminders out to them pretty promptly. And pretty promptly means literally the next day those reminders go out to them.

If they contact you and you're going to agree to some form of payment proposal, they might be hitting hard times and you are comfortable with that, then first of all, don't accept whatever they tell you as what they're going to pay you. You are in the driving seat there as well. So, keep the notes of what that payment proposal has been.

Get it agreed in writing, and when I say in writing, you don't need a lawyer. Just get it into an email. Say, yes, that's okay, we're happy to accept two installments. You'll pay X percent now, expected in so many days time, do you agree to it? And then get that sent out to them, get them to acknowledge it, and then that's fine that you go on.

Don't let the personality of the business owner sway your decision. Again, as I said, I've made that mistake myself. I've got my fingers burnt 25 years ago when I first started, and once everything gets back onto an even keel, I made the same mistake again. I'll let the personality sway systems. I did get reprimanded by my credit control department, so never again, but again, be consistent.

So, let's summarise what we talked about here. Getting paid on time is an absolutely critical thing if you don't get paid on time, then that puts pressure on your own business. You've got to find that cash, the funds to pay your supplies, pay your staff, pay your operating costs, and pay yourself. That money fundamentally comes from your customers.

Customers will pick up on the vibe, believe it or not. Now, I'm not saying it's a blanket rule. There will be exceptional times, but use your judgment carefully. Don't be swayed by the personality. So, that PTC again, policies and culture. So, due diligence. Establish your credit terms. Know who you're going to be communicating it to.

Make sure it's the person who pays the bills. Size of business. The bigger the business, the bigger the risk. Tracking. Keep an eye on it. Software systems, cloud systems, apps, they're all around you and they can make it easier to send those invoices out. Just get those invoices sent out on time. And remember, by the way, that customers count the days from when they get the invoice, not from when you've done the work.

So, again, get your act together, get those invoices out as soon as the work is completed. Monitor them. So, have a look at reports, which are quite accessible on these applications. If you don't like software, which is a bit silly, but if you don't like software, then keep a piece of paper, keep a spreadsheet, but monitor who you billed, when they owe the money, and have a look at that on a weekly basis.

I'm probably a bit sad. I do mine on a more regular basis, on a daily basis, but that's the nature of the business that I'm in. And lastly, be consistent. Don't differentiate based on personality. Business is a business and if a business doesn't pay you, they disrespect you. They don't want to pay their bills on time, they go under, they hide under the duvet, or whatever they're doing here.

That's not good news and your business is going to suffer and you are going to suffer as a result. Couple of tips to share with you what you might find slightly easier to deal with. I would recommend that if you do work for a client. You've got all the terms agreed. You've got everything established here. Before the credit term is up,

so, if you've given 21 days, I would typically, as part of a call cycle, contact the customer. See is everything okay? Did they get the invoice? Et cetera, et cetera. You don't want that my dog or hamster ate the invoice, or didn't receive it, so that way you can tick the box. If they say, oh, we've never received the document,

it could have gone to the wrong department. It could have gone somewhere else. It could have gone into spam folder. That gives you the opportunity to reissue the invoice. Another thing. If you're finding it difficult to have that conversation with a client who hasn't paid their bills, you feel that you might damage that potential relationship,

if it's a relationship that's worth continuing with, then what I would recommend is in your email setup, get another email setup, something like accounts@whatever your business name is and get that sent from them. If you've got somebody else in the business that is not customer-facing, perhaps they can handle the admin side,

Perhaps they could send out the email. So, you can separate yourself from the actual credit-control function and ultimately just say, company policy, this is what happens here. So, there's a bit of a gap given between you and that end customer. A tip that I give to all my clients is to say, look, just say my accountants told me to do this

if suddenly your culture changes to be a bit more on top of it. Okay guys, look, thank you very much for sharing your earlobes. Hope you enjoyed the third episode of I Hate Numbers Podcast. Getting paid on time. Absolutely critical. Keep that money coming in and your business will be thriving and prosperous there as well.

Check out the show notes at the end. Check out the useful links and if you'd love the episode, share it with your friends, family, and those who will be interested. Take care. Ciao. We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode.

We look forward to you joining us next week for another I Hate Numbers episode.