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Cash Flow

Master the Art of Collecting Your Cash

Hate making collection calls? How to do them right.

Michelle Dunn

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Let’s face it: No one likes making collection calls. So it makes sense to try to get the most out of each call. Making collection calls is a skill you can develop. You have to be able to anticipate what the customer is going to say and be ready for anything, and you must remain in control of the call. For your call to be a success, it must always result in agreement on what is to be done.

From a business owner’s standpoint, a collection call is one more in a long list of things to do. Here are a few tips that will help you get your collection calls done quickly and
efficiently.

  • Schedule a regular time or day each week to make collection calls.
  • Have all account information on hand.
  • Leave messages, but do not reveal that the call is about an unpaid bill.
  • Get the debtor to acknowledge the debt by asking if there was a question about the charge.
  • Offer to take a credit card over the phone for payment.
  • Ask when they will pay – and wait for an answer.
  • Let them know you are documenting whatever commitment they make about a payment on their account.

You must ask questions that require specific answers when you are making collection calls. Speak with precision and make the transition from questions to a payment arrangement. Each question should be clear and to the point, with silence after each. An example:

Debtor: I can’t pay; I don’t have any money.

Collector: Are you working?

Debtor: Yes, but I just started a job and don’t get paid for two weeks.

Collector: What day will you get paid?

Debtor: Friday.

Collector:  On Saturday, you can do an EFT for R250.

This scenario can go in several directions  depending on how the debtor responds. You have to be positive, confident and compel the debtor to agree to make a payment. Once you have come to an agreement, send a confirmation letter with a payment envelope.

Then call on Friday to remind them to mail the payment the next day.

Avoid the excuses

Keep in mind that people will use a lot of excuses to avoid paying. I have had debtors tell me they did not receive the confirmation letter with the payment envelope and don’t have any envelopes themselves, so they can’t make the payment.

Be ready for anything; you will never stop hearing new and different excuses. I told this particular customer that I could send her another payment envelope but I also needed a new address so I could make sure she would receive it, and then she could make two payments when she received it.

The other option was taking a payment over the phone.

Collecting money

It’s essential to convey confidence when speaking to customers about a past-due bill or discrepancy.

Here are four tips for a confident phone voice that will help you to collect more money:

  1. Your greeting. People often make a judgement about you in the first two seconds of an interaction. It’s not what you say in that short time that matters most, but how you present yourself. A dull monotone will leave your listener with little confidence in you. Smile when you speak on the phone; it will be noticeable in your voice.
  2. Your voice. Sit up straight in your chair and picture the customer across the desk from you. Pay attention to how different your body language is. Now slump in your chair, and notice how people react to you differently.
  3. Eye contact. Since there is no eye contact when you’re on the phone, try to remain focused on the call and not on anything else going on around you. Think about how it feels when you are talking to someone who keeps looking around behind you to see what else is going on. Focus on your caller and be aware and alert.
  4. Confidence. Former California Governor Arnold Schwarzenegger is an example of someone who has an air of confidence about him. You won’t see him wringing his hands or rubbing them repeatedly through his hair, shuffling from foot to foot, or jiggling the change in his pocket. He comes across as someone who won’t cower or retreat, just as a bill collector should act.

Be ready for some emotional reactions when you make calls to past-due customers. They might be angry, embarrassed, sad, or frustrated. They might cry, swear, and yell. But keep in mind that the purpose of your call is to get the bill paid.

You can listen, let them know that you understand – even offer solutions – but get the bill paid.

Hot Tips

Getting paid faster

Five ways to ease the hassle of debt collection.

Getting customers to pay on time is one of the biggest challenges for entrepreneurs as the economic recovery drags on. And when the problem persists too long, it can ultimately shut down your small business.

Here are five tips for getting paid faster.

  1. Send invoices ASAP. It’s all too common for business owners to finish their work for a customer and neglect to submit a bill. You can’t believe how slow small business owners are at getting their invoices out, and the truth is the client has no obligation until they receive the invoice.
  2. Explain every single charge. Don’t send your customer an invoice with only a rand amount on it. Itemise everything the customer has bought or every service you provided and highlight any discounts given.
  3. Make deadlines crystal clear. Don’t allow the opportunity for any confusion. You need to tell your client when they sign the initial contract how much time they have to pay you. Also, reiterate your policy on both the billing invoice and packing slip. It needs to be there so there is no ambiguity as to when that bill should be paid.
  4. More invoices for smaller amounts. If possible, you want to avoid hitting your client with one, giant bill. A client is more likely to sit on a bill that is overwhelmingly large. Make it easier for the client to pay you. Also, by getting paid in small, frequent increments, you protect your business from losing a lot of money should your client go belly-up while they are sitting on an unpaid invoice.
  5. Make a personal connection. Send a handwritten thank you note on a fairly regular basis. The next time there is a bottleneck in the payment schedule at your client, the accountant will remember you. When they see your invoice come through, you are not just another vendor.

Michelle Dunn, author of an award winning book, columnist, one of the Top 5 Women in Collections in 2007 & 2008, one of the Top 50 Most Influential Collection Professionals of 2007 shares her hard-won expertise on debt collection with the titles in her "Collecting Money Series."

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1 Comment

1 Comment

  1. N N B

    Nov 13, 2012 at 12:50

    What are the other options available to you as a small business owner, when you’ve been trying mostly what’s recommended in this article but you still come up short where collections are conccerned?

    Legal route maybe?

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Cash Flow

7 Things Every Entrepreneur Should Know About Managing Cash In The Business

Every entrepreneur needs to know how to prepare for cash, manage it effectively and mitigate fraud.

Chris Ogden

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Cash is complicated. It can’t be tracked properly, it opens up avenues for fraud, it gets stolen, and it is difficult to manage. It’s also an unfortunate reality that, in South Africa, cash payments and transactions are both inevitable and essential. So how can the entrepreneur overcome the challenges of handling cash? Here are seven ways…

1. Digitise

There are many ways to manage payments in the market today. You can Snapscan, you can Zapper, you can EFT and you can use an app to send money from a wallet to a mobile number. The problem is that none of these options recognise the fact that cash is still the leading method of payment in most markets. So, to really accommodate cash, the entrepreneur needs to look to digital solutions.

You can still physically collect cash, but digitise the transactional information so that you can easily identify the transaction and reconcile the cash collector.

Related: 5 Cash Management Tactics Small Businesses Use To Become Bigger Businesses

2. Protect the consumer

Ensuring that every cash transaction is tracked digitally means that you are protecting the consumer if the cash or transaction are lost. There is always the question – how can you service your customers post-payment without proof on your side? Ensure that your cash transactions are audited and accounted for to ensure you can recon accurately.

3. Don’t be a target

High collection points – those points where a lot of cash is collected and held – tend to become targets. Try to avoid putting your business in line of sight by using tools that can either limit the use of high collection points or that can alert the relevant security authorities if a theft occurs. Again, it comes down to digital tools to monitor, track and alert the right people at the right time.

4. Teach your customers

It’s one thing to invest into a bevy of tools and services to protect your transactions and consumers, another to let consumers make any number of silly mistakes. Teach your customers about fraud, potential risks, things to look out for and trust. They shouldn’t hand over their cash without the collector using the right tools or app and should be wary of any transaction that doesn’t have these protections built in.

Related: Improve Your Cash Flow: Manage Your VAT

5. Test and adapt

Invariably, those who want to commit fraud are equally committed to doing so. They will find loopholes and gaps that allow them to take advantage of you and your customers. Your best bet is to constantly test and adapt your systems, to build metrics in-house that measure inconsistencies and report back on any issues.

People are very creative and will find a way of helping themselves to cash that isn’t theirs.

6. Negotiate

Cash is expensive to manage so find ways of negotiating better deals with banks so you get the best fees. Cash-in-transit is expensive, but often necessary when it comes to large cash deposits.

7. Invest in a payment solution

Digital payment solutions aren’t always possible, but try to employ one that is easy to use and that can be gradually introduced to your customers. Adoption may be slow – it can take years to achieve low cash/high digital payments – but it will benefit you and your business in the long term.

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Cash Flow

5 Cash Management Tactics Small Businesses Use To Become Bigger Businesses

Reaching your highest potential as a business owner depends on maintaining positive cash flow.

Lisa Stevens

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You may have heard the phrase “Cash flow is the blood that keeps a business alive.” This couldn’t be truer, as consistent positive cash flow can help a business owner pay expenses, invest in new opportunities or grow a business.

Fortunately, as small-business-owner optimism remains high, most owners expect a healthy cash flow this year. The January 2018 Wells Fargo/Gallup Small Business Index found 77 percent of small-business owners rated their company’s cash flow as very good or somewhat good over the past 12 months, up from 73 percent in November 2017.

To help with managing cash flow, here are five tips you should consider:

1. Spread out your payments

Paying all your business bills at the same time rather than spreading them out can drain your disposable income and leave you at risk of not being able to pay your creditors and suppliers if an unexpected expense occurs.

Instead, try paying your bills closer to the due dates and negotiate with your vendors to see if you can extend your payables to 60 or 90 days.

Also, be sure to pay your most important bills, such as rent and payroll, before paying less important bills.

Related: 8 Ways to Avoid Cash Flow Surprises That Could Kill Your Business

Check with your vendor to see if you can receive discounts for paying any bills early. Remember to pay all your bills before the due date to maintain a good credit standing.

2. Collect payments quickly

Another way to improve cash flow is to incentivise customers to pay early by offering discounts.

Other techniques for collecting payments quickly include requiring deposits from your customers when taking orders and offering online payment options.

Thanks to advancements in technology, there are multiple ways for your customers to complete quick and efficient transactions with your business. One example is electronic billing, which allows for you to customize invoices and set up automatic payment reminders for customers.

credit-policy3. Establish a strict credit policy

It’s important to be wise about extending credit as a business. A non-paying customer can be a hefty expense to a small-business owner.

Establish a written set of standards for determining who is eligible for credit, and enforce those standards rigidly.

Also, be sure to require a credit check for all new customers before extending credit and monitor your accounts to identify late payers early so you can offer them a variety of payment options. These options might include a credit card charge or a payment plan.

4. Align your payroll cycle with your revenue stream

Some businesses, such as restaurants and retailers, generate daily revenue and can more easily cover the expense needed for weekly payroll.

Related: 5 Marketing Missteps That Make Cash Flow And Business Growth Stumble

For others, such as manufacturers, this could be a challenge, and you may benefit from paying employees less frequently, provided applicable wage laws allow you to do so. Refer to your state Department of Labor for pay frequency information.

5. Plan ahead for cash shortages

Expect the unexpected. Typically cash flow will vary, and unexpected expenses will occur even for established businesses.

Keeping a rainy day fund with three to six months of basic operating expenses in a reserve can prepare you for slow periods and emergencies.

Another option is to use a business credit card or business line of credit to pay for everyday expenses and help bridge gaps in cash flow.  Be sure to monitor your expenses with online banking and monthly statements.

Related: How Amazon Is Keeping It Lean

One important tool for planning ahead is a cash flow forecast, usually a one-year prediction of how cash will move in and out of the business. This helps business owners evaluate how profitable future sales will be, and provides an overview of what needs to be done to reach your goals.

In its simplest form, a cash flow forecast should show where cash balances will be at certain points in the future so you can anticipate and prevent cash shortages. To get started, organize your payables and receivables on a spreadsheet to see where money is coming and going.

Ultimately, reaching your highest potential as a business owner and being able to serve your customers effectively depends on maintaining positive cash flow. Following the tips above may help keep your business financially strong and position your company for success.

This article was originally posted here on Entrepreneur.com.

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Cash Flow

Why Cash Flow Is King But Margin is King Kong

Why you should shift your attention from cash flow to creating — and maintaining — strong margins for long-term growth and success.

Allon Raiz

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Conventional business wisdom states that turnover is vanity, profit is sanity, and cash flow is reality. And while this is true (very true), the focus on cash flow can become a distraction to what, in my opinion, is a more important focus. I see cashflow issues as symptomatic of other, hidden elements of running a business properly. The most important lever of all is the creation of margin (gross profits) in your business.

Here are five pointers to consider.

1. Chasing cash flow can be a distraction

The underlying driver for creating margin is creating defendable, distinguishable value for a client. When you create defendable, distinguishable value, it translates into the ability to charge more for your products and services since, by definition, there are lower competitive forces at play along with a higher perceived value.

Higher margins translate into higher net profits and this, over time, goes a long way towards reducing the effects of bad cash flow management.

Related: Strategies To Help You Stay Out Of The Red With Cash Flow

2. Create cash flow systems

When analysing the thousands of businesses to which I have been exposed over the last 18 years, I have seen that the majority of those experiencing cash flow problems have weak to non-existent cash flow systems. A few important systems and approaches can make all the difference in managing your cash flow better, and will give you more time to focus on creating defendable, distinguishable value.

These systems include: Budgets (that are used); creditors’ policies (that are implemented); a tough creditors’ clerk (who has no problem hunting down cash); and nurturing strong relationships with clients (in particular, with their accounts departments).

3. Margin increases resilience

Not only does margin create a cushion of cash that can be used to smooth over delinquent payers, but it also allows for a mindset of freedom to provide additional cost-bearing value-add to clients in emergency situations that require it, without any anxiety as to the overall profitability of the deal. This almost always leads to improved client relationships.

Related: Cash Flow Tips For Small Businesses To Survive Rocky Times

4. Margin increases the depth of core competencies

Some of the profitability generated by increased margin should, in my opinion, be channelled into deepening the core competencies of the business.

Deeper core competencies reinforce the company’s defendable, distinguishable value-add which creates more cash — a virtuous cycle. This cycle needs to be jealously maintained and guarded.

5. Margin keeps the client at the centre of attention

When you focus exclusively on cash flow, you are — to all intents and purposes — focusing on yourself. Your energy is concentrated on insuring that you have sufficient funds to maintain the operations of your business. When your priority is margin, your client becomes the centre of your business existence.

Your focus moves to their needs and solving their problems. This ensures longer-term, more profitable and stronger relationships with your clients. The result — given that proper cash flow systems are in place — is a business that does not experience cash flow issues.

The problem with conventional pieces of business wisdom is that they sound plausible and contain just enough truth for you to make them guidelines in your business. Perhaps a deeper analysis of their true wisdom, and whether or not they are masking a cause or effect, will result in you adopting practices that are more valuable to your business in the long run.

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