Electricians - Reduce your accounts receivables today

Are you acting as a bank to your customers? Did it occur to you that if you have $10,000 in your accounts receivables, you are effectively giving your clients collectively almost $4,500 of interest free loan for the month? $4,500 can buy many cans of beer, a whole lot of fishing gear or simply reinvesting into your own business! Big or small business, I’m sure we’d all like that $4,500 in our pocket right now!

Whether you’re a plumber, electrician or locksmith, cash flow is the oxygen to your business.  A tradie is an expert in spinning the tools compared to number crunching, but if the numbers fall apart, the tools stops spinning.

If your accounts receivables are consistently showing tens of thousands of dollars, it’s time to do something about it

1.  Invoice your customer immediately

Do not wait until the end of the month to do your invoicing. Invoice your customer on site right after a job is completed and investigate what options you have available for also collecting payment on site to expedite things. Do this by having an automated invoicing system in place. For example once an electrician has completed a job on site, he can generate an invoice immediately and also process the credit card payment directly on his mobile phone - effectively cutting out the whole accounts receivable process.

2.  Reduce payment terms

If immediate payment is not possible, reducing the payment terms works very well especially if you’re able to email your customers the invoice right away after a job is completed. A 30-day payment term is too long in today’s fast paced environment. A 7-day payment term (or COD for residential clients) is totally acceptable!

3.  Have very clear payment terms and payment options on your invoice

Always make the due date on your invoice very clear and easy to read. Provide multiple payment options to your customers to make it easy for them to pay you.

4. Automate your payment reminders

Get a system that can automatically send out payment reminders to your customers after their unpaid invoices become due. Let the system act as your debt collector in a systematic and organized way. This can be in the form or an email or SMS reminder. An awesome Job Management System like Ascora can do this for you without hassle and eliminates the need to follow up with customers who just forgot about the invoice.

5. Discount for early payment

One proven way to get your customers to pay you on time is to provide a discount for early payment. In fact, market this to your customers as a savings to them if they settle the invoice before the due date. This is a win-win situation for both parties – you get paid early, mitigating any interest free loan to your customers and your customers are happy paying less than the full quoted price.

6. Maintain a good relationship with the customers

Good customer relationships not only generate repeat businesses but happy customers are more likely to pay on time. Should a customer have to prioritise payments, suppliers who fulfil their tasks above and beyond and who have a great business relationship will normally get paid first.

Try one or all of the above simple tips to improve your cash flow and keep the sparkies’ tools spinning!