How to get paid on time and keep cash flow positive
Positive cash flow is critical for any franchise business to stay afloat. Even if business is good and sales are up, if you’re not getting paid on time, your business can quickly become unsustainable.
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There are some things you can do to encourage more of your customers to pay on time. Start by keeping the lines of communication open. You’re in the business to make money so don’t be afraid to talk about it – the sooner, the better. If you leave it too long, it will becomes more and more difficult to bring up, and it sends a clear message that you are not on top of your finances or worse, that you don’t care.
Knowing your own business and your customers’ will help you to set up payment terms that work. For large and/or valued customers, if you understand their payment cycle, you can adjust your own terms to fit, or at least you’ll understand when you’re likely to see the money. Payment terms and conditions can vary depending on your franchise agreement – you could request payment in seven days or up to a month. You could also consider requesting a deposit to ease cash flow pressure.
People are more likely to treat each other well if they a have a personal relationship. Therefore, it literally pays to get to know your customers. Do your research before signing up new clients. It’s amazing what a quick Google search and a social media scan can turn up. If there are complaints about the business, you’ll find them there. Also make sure you have all the contact details you need and keep them up to date.
Where you can, automate. Many franchise systems have cloud-based software available to franchisees. Cloud-based accounting software makes light work of invoicing. It’s efficient and accurate. But when push comes to shove, it’s often the personal touch (such as a phone call) that gets the job done. Also, a generic email address, such as email@example.com, can help to encourage other businesses to take you seriously.
Finally, if you want other people to pay you promptly, you need to make sure your own bookkeeping is impeccable. Stay on top of your finances so you can find out at any given time who owes you and how much. If your own bookkeeping is sloppy, you should expect nothing more from your clients. Likewise, if you want to be paid on time, make sure you pay others on time too. It’s karma.
Check out our top tips for franchisees.
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