As we move into the new year and look back on 2020, we are able to get a clearer picture of what topics to cover in 2021. The mission of this blog is to inform our readers, whether they're our clients or not. It's important for us to help tech entrepreneurs, startup businesses, small businesses, freelancers, independent consultants, manufacturers and other business-to-business organizations build better relationships with their clients. We believe better relationships mean better cashflow.
The internet allows for businesses to sell the use of software (and hardware) and revenue is collected either yearly or monthly as a subscription service. The as-a-service or subscription business model is sustainable as long as payments are received. Because client retention is very important to this business model, debt collections must be handled with business relationships in mind.
As if the month of December isn't blurry enough, your accounting department is working on year-end activities. Whether your business is a single-person shop or an enterprise corporation, the end of the year may also be the end of your fiscal year. Common activities during this time will provide insights into your business' financial situation including:
It's time to take a closer look at some of these numbers to figure out exactly how well you're following up on those accounts receivable invoices.
As if it's not challenging enough to deal with late paying clients, the pandemic and the holiday season can add more stress. Your business may be working to resolve late payments to close out your year. Your clients may be struggling with cash flow shortages due to the pandemic. Is there a gentle-yet-firm way to ask that your invoices are paid on time?
As we've said before, time is money. With that in mind, the last thing you or your sales reps want to do is spend time with a client who:
Timing is also everything. Your salespeople need to be able to identify if the client meets all of your qualifiers and is ready to buy.
Yesterday, the LA Times reported "'Work from Anywhere'" is Here to Stay" noting that tech companies are leading the way to making remote work permanent for their employees. IBM's CEO also stated that even with a predicted COVID vaccine, remote work would continue. It's not a surprise that for technology or digital marketing companies, remote work will be the norm, even after the pandemic. What was a bonus for employees before, has now turned into cost savings for these businesses.
Small businesses and startups must think on their feet, and that includes getting their accounts receivables paid quickly. Business relationships are an integral part of the success and growth of these companies. Protecting these relationships should be a part of the collections process as well.
The pandemic has unfortunately hit many businesses right where it hurts. Economists have discovered a current proliferation of businesses who may actually already be "dead inside". Zombie companies earn just enough money to scrape by, acquiring more debt along the way and relying on bailouts to keep going. The problem is that they're unable to afford the cost of the debt and are a high risk to investors. One small blip on the radar, a bad quarter or market event, and they're DOA.
It's frustrating when your clients aren't paying their invoices on time. When you find that they are actually "walking dead", it can be downright terrifying.
In the age of social media and rapid-fire news stories, it's important for businesses to consider their brand reputation. If your accounting team outsources its bad debt or unpaid receivables to a collections agency, it's also important to protect your brand. Quite simply, a negative experience with a collections company could sour business relationships and your branding.
When you're trying to learn more about your business finances, a cash flow statement is a must. This financial statement paints a clear picture of how your business is managing its cash to pay debts and fund operations. The cash flow statement can help determine the success of your business and be an important indicator of potential to an investor.
