Ever been told cash is king? Do you know how much you have in your bank accounts this single moment? Do you know how much is owed to you? Don’t get bogged down or scared of accounts receivable.
Print shops continually struggle with accounts receivable because they assume that once a job is printed, they will get paid for it. What shops overlook is the process of getting paid, and the heavy burden associated with A/R.
Remember, that money owed to you is not money you can further spend until it is in your bank account! Let’s look at some best practices to create a positive cash flow in your business.
Create “In Stone” Terms
A terms sheet for your business is how you would like to get paid for the services you provide. Recognize that while you can create your own terms, some companies will have their own terms for paying you.
When you walk into a department store to buy a product, you are expected to pay for it before leaving the store. With custom goods, take a similar approach and establish a guideline that discusses the following:
- When dealing with a walk-in customer, payment is either due up front, or a deposit is due before a job starts. Remaining payment is due before the job is picked up or shipped.
- Credit Card, Cash or Check terms are made that explain costs associated with processing each one. Credit card fees can be costly if contract printing, so account for that in your terms.
- If customer represents an organization, require a purchase order that outlines payment terms. Larger companies, government agencies, or established organizations will have their own means of paying bills. You will need to accommodate for these in order to win their business.
- If a customer wants net terms, establish when payment is due, how many days out it is owed, and penalties incurred if an invoice is past due.
- Create a net terms application form for established customers that you are more or less comfortable giving credit to. There can be 30, 60, and 90-day terms you set up with them.
Remember, you are performing a service for a person, group, organization or company. You are not expected to be a bank that gives out loans, so unless you have a very strong team that can hold customers accountable, do not give out money for free!
Establish A Routine
Train your staff to handle A/R seriously.
Have them send out bills weekly and create an A/R report weekly that outlines money that is owed to you. This should come to your desk weekly to locate any red flags that you need to address.
Make sure that invoices are marked as paid the second they come in and that checks are cashed regularly to make sure you are reporting pay-ins properly. Handle past due invoices immediately. The longer they sit, the less of a chance you have for getting paid. This bad debt is not an enjoyable number to look at when closing your year-end financials.
Make Accepting Payment Simple
If you can’t get an invoice out to your customer quickly, and you are not providing them with common-day ways to pay for their bills, collecting payments will be a nightmare. Printavo accepts payments using Authorize.net, Paypal, Square Reader or Stripe.
Protect Your Cash Flow
If you follow these basic best practices, you will continually have available funds to run your business. Be sure that you are using a strong piece of accounting software like QuickBooks that will take into account all your different payables and receivables you have to run a financially responsible business.
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