Improving Cash Flows Via Client Psychology

For many firms and small businesses, one of the byproducts of challenging economical conditions is that many debtors take this opportunity to delay their bill payments even more than they would under normal conditions. This unfortunate attitude is sadly encouraged by an accepted model of payment, where  the creditor produces an invoice with the payment date being 7 days after invoicing at best, and in many cases the 20th of the following month.

I would suggest that the power of this habit currently weighs heavily on many small firm owners, inflicting lingering cashflow issues and wasting precious staff resources that would be better spent on creating the WOW factor for good customers. Yet if we care to think outside the square for a minute there is a range of simple solutions to this widespread problem.

I will take the example of the service industry as it seems to be suffering the most from delayed payments.  The general accepted model in dealing with prospective customers tends to separate the sales process from the agreement on payment terms. I understand that the service provider doesn’t want to upset the  new client and potentially lose the sale by imposing a payment schedule from the outset.

However because the client  is in the process of purchasing your service, they already are in a positive mindset. All the potential objections and concerns have been overcome and this is your opportunity to call the shots.  Purchasing is always an emotional decision, and it is the best possible time to “sell” your customers a payment schedule that saves you the excruciating delays in payment. Good retailers know this very well, as they always have an up sell package to suggest you at the point of sale.

So why not simply “up sell” your client to an upfront payment and even a retainer , so that your business remains in positive cashflow while you are in the process of delivering the service or product.  The balance of your contractual agreement can be paid upon completion of the project. I have been using this approach for several years now and have never lost a proposal because of my preferred payment model, which is always included in my sales process.

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