Oct 6, 2020
We’ve been talking with our engineering clients, and a vast majority of them have been complaining that their clients are paying them slowly. However, the main reason this happens is that you’ve trained them to pay you slowly. So in this Monday Morning Memo, Wilson and Samantha Cole will tackle how an engineering firm can speed up their cash flow.
Three Things That Engineering Firms Can Do To Speed Up Cash Flow
Speeding up your cash flow might seem like a complicated task. However, there are three key ways that you can quickly get it done.
Get Rid of Net 30-Day Terms, 50-Day Terms, and Anything Similar In Your Invoice.
Some engineering firms will have a big issue with their invoice, where some of them will have 30-day terms, 50-day terms, or something similar. Usually, you have to add an additional 15 days to these terms, which further extends the time limit that your clients have when it comes to paying you. A great alternative to these terms is to start putting in a set date on your invoices.
As they’re inputting it in their system, it will show that specific date on their records, and it will show up as past due when they pull up the reports. Once they start having these records pulled, they will arrange the dates as they come in. This will cut in half, on average, the number of days that you have outstanding invoices.
Get a Personal Guarantee Where Applicable
An issue that your company may run into is that one of your clients that owes you will go out of business. This is a problem because you may not be able to collect the debt. One way to ensure that you get paid regardless of what happens to a company is to get a personal guarantee.
Personal guarantees transfer liability of the debt to the individual who signed it if the company were to go under. It not only protects you from a client’s bankruptcy, but it also pushes you up the food chain because of how they are now personally responsible for the debt.
Create a Sequence of Collection Letters or Postcards
One of the things that will get your debtor to pay you is to remind them that they are behind. A great way to do this is to have a sequence of collection letters of postcards that you can attach to statements of account. Each letter will remind them that they’re behind and show them you know they’re behind. It creates a sense of urgency with each letter that they receive.
● The reason why clients pay you too slow is that you’ve trained them to pay you slowly.
● If you want to speed up your cash flow, put a specific date on it
● If they personally guarantee it, chances are that you’re going to get paid first.