4 proven tactics to stop negative cash flow in your small business

Every business owner or founder has experienced the effects of negative cash flow at some point.

The question for you is, how long are you going to let this go for and how often are you going to tolerate negative cash flow?

Whether you’re running a lawn care or landscaping company, dental practice, or even a restoration company, you’re not immune to the frustrations of late paying customers and negative cash flow.

Hoping customers will pay is just not a strategy. It’s a recipe for even further financial difficulties for your small or medium-sized business.

What does your business need to do to get back your positive cash flow? Check out our four must-haves!

First acknowledge your negative situation

OK, it’s time to open your books!

If you’re not being paid on time, or not getting paid at all, your small business is operating at a deficit. Let’s start to correct that. It begins by sitting down with your bookkeeper or CPA. At a minimum, you should be asking and answering these questions.

• How much money is currently tied up in unpaid invoices?
• How much have you stopped collecting or worse, written off?
• What is the time and energy you and your staff are spending worrying, following up and then waiting at the mailbox?
• And what goals and expenses are you postponing because you don’t have the cash?

We find that small business owners and founders have begun to downplay their situation. They say customers that haven’t paid on time have been customers for years and they believe eventually they will catch up. But that’s not a justification for easing up on your efforts to get paid. If your cash flow is being disrupted, your entire business is at risk so it’s time to take action.

Your immediate action step is to pull up your receivables report, sit down with your bookkeeper and begin to add everything that is overdue for at least 30 days. That number contributes to your negative cash flow.

Your small business must act with urgency

The longer invoices go unpaid the less likely they are going to be collected, and you’ve heard us say that numerous times here. If you continue to delay taking action that is only going to equal to more money you’re losing. And it’s not just money but it’s momentum in your business.

That’s why getting ahead of unpaid invoices is an urgency.

It’s understandable you want to take care of customers that have been with you for the long term, however if customers feel they can get away with putting off your invoice, your cash flow is ultimately going to suffer.

• Late payments are not just frustrating. They impact your entire operation.
• Your ability to pay your staff or contractors in a timely fashion.
• The relationships you have with vendors.
• Your growth plans.
• Your Peace of Mind and stress level.

What are your actions? Create a list or build a report of all overdue accounts, sorting them by age and amount. You can have your bookkeeper run this report for you. Now, you’ll have an understanding of just how late some of your customers are.

Develop standards and envision a positive outcome

Imagine what you want for your business moving forward. That can include your invoices being paid consistently and on time for the most part. You have reliable cash flow which can help you operate your business and prepare for ups and downs in revenue. And you might even gain a little sleep back because you’re worrying less about late paying clients.

This is more than just imagining. It’s how your business should be operating. Setting expectations, enforcing your payment policies and getting assertive when customers don’t pay is how you will boost positive cash flow.

Take back control of your cash flow with these steps

You can still maintain great relationships with your customers and patients, and regain control by being firm about payment expectations. Those two can live together in your business.

How should you start?

Review every step of the customer journey and decide where you are going to articulate payment terms. Those expectations should be clearly spelled out on proposals invoices in any other document you feel necessary. Update those documents ASAP.

Standardize your follow-up process for late paying customers.

You decide what that cadence should be but typically, each invoice should have a solid due date. Approximately 5 to 7 days later, a follow up call or statement in the mail. After 30 days, consider sending that to your third party collection agency.

If you do not use a third party collection agency, what are you waiting for?

Some customers simply won’t pay until a third party is involved. A collection agency can help you recover funds without damaging your customer relationship and they can create the urgency necessary to get you paid.