One critical element of running a successful business is that you need consistent and regular cash flow coming into our business so that you can pay your bills and, more importantly, pay yourself! I come across too many business owners who do not have this crucial foundational system in place. As a result they’re on a constant feast or famine cycle … you know, some months they have a massive surge in income and the following month they hardly have two pennies to rub together.
As well as being an inefficient way to run a business it’s also very stressful. You never know if you’re going to have a good month this month, and be able to pay your bills, or barely scrape by.
For these reasons I am huge fan of payment plans, both for making my own purchases in my business and for clients to pay me. Why? Because it helps enormously with cash flow – which is crucial when it comes to the smooth running, and long-term success, of your business.
On the expenses side, I can easily budget for expenses. I know exactly how much is going out of the business each and every month.
And on the income side, I can easily anticipate how much is going to come into the business every month, and make plans accordingly. And I can also grab opportunities as they present themselves because I know my financial situation.
Today I’d like to share with you my five steps to increasing cash flow in your own business, but also to make you aware of the pitfalls too.
1. Get a merchant account. I consider this a must-have for any business owner wishing to do business online or provide one-on-one services with clients. With a merchant account you can very easily accept all major credit cards (without your clients and customers having to go via Paypal which, for various reasons, I don’t recommend). And, most importantly, you can set your client payments up for automatic recurring billing. Doesn’t that sound heavenly?
2. Offer payment plans. Again, this is a must-have for anything you sell costing more than $150. So this would apply to your products, programs, and mostly your one-on-one client services. How you choose to set up your payment plans is entirely up to you, but a good rule of thumb is to add between 10-20% onto the full pay price and divide that number by the required number of payments. For private client payment plans, you may want to approach that slightly differently, depending on the program and investment level.
3. Don’t stretch payment plans out too far. This is especially important for your group programs and one-on-one client programs. You want to ensure that when the end of the program is reached the client has made all of their payments. There is the danger that if you let payments go beyond the end of the program the client will feel that they’re paying for a program they are no longer a part of, and this can result in higher credit card declines.
4. Have clear payment policies in place. Talking of declines and other ‘uncomfortable’ payment issues, make sure you have a clear policy in place for how you’re going to collect on non-payers. How do you contact them, i.e. phone, email, certified letter, and how long do you leave it before making contact with them? Are you willing to go as far as handing things over to a collections agency?
5. Be aware of all the fees involved. Many business owners get stung by unforeseen merchant and shopping cart fees. Check out what fees are involved on your merchant account – there is usually a monthly account fee, a monthly gateway fee, and per transaction fees. And if you’re using recurring billing through your shopping cart, check out their recurring transaction fees too.
Increasing your cash flow by offering payments options is definitely a good way forward, both for you as the business owner and your clients. But do be fully aware of any costs and pitfalls involved so that you can plan and budget accordingly.© Copyright 2012 TextOnly'Admin