Managing Cashlow in your PAT Testing business
We see it all the time, people on forums asking for help with late payers. It happens to every business from time to time and is something that needs managing, often with care and professionalism.
However, you can put systems in place so you don’t have to worry about late payments. Let’s look at your options.
Cashflow is king to every business. Understanding the importance of cashflow is essential to operating a successful business. Without cash circulating through your business it will become increasingly difficult to operate.
As a PAT tester, as your business grows you may find it easier to manage the odd late payer, as other payments cover your need for cash, but especially in the early days, you need every penny in on time.
How are you managing your Cashflow?
You need good software in place to help you – a good accountancy package will help you to track quotes and invoices, and should link to your bank statements. There are many on the market, ranging from free to very expensive so choose wisely. Good software is a great tool to help you manage your incoming and outgoings every month.
Invoicing on time – this may surprise you but loads of businesses are bad at invoicing; you need to make sure you invoice on time and if you give credit terms you must be able to afford them. For example, if you need paying straightaway, don’t offer 30 days, but on the other hand if you want to grow your business and get plenty of commercial clients you going to have to accept that payment on 30 days is fairly standard.
Remember the sooner you invoice the sooner you get paid. Have you considered a card reader? They’re mobile these days and can work with your iPhone – carry them to jobs and get paid straightaway.
Make it easy to get paid
Customers can pay you by cash, card, bank transfer, cheque etc but make sure you not only tell them their options but tell them which method you prefer. Don’t assume.
Make sure you’re clear that a customer can pay by card – most people prefer to do that.
If you have payment terms make sure you are very clear about them and set them out from the start – from the quotation point. You can’t quote for a job, do the job, invoice it and then tell them they have to pay instantly. Many commercial clients won’t go with you if they can’t pay on a credit term.
Invoices also need to include your policy for dealing with late payments – if you’re going to include charges and interest you need to warn buyers about that.
Offer an incentive to improve Cashflow
Offering an incentive is a great way to get paid quicker, such as offering a discount if paid within a few days, or upfront. We offer a discount if clients pay for the job upfront – this works really well and saves time later as we don’t have invoices to chase up.
Ask for a Deposit
Deposits are another option – ask for a retainer to book an appointment, or a percentage upfront. Getting paid early, even for part of the cost, can improve your cashflow dramatically.
Staggered Payments improve Cashflow for you and your clients
If the invoice is big, in the thousands perhaps, the client may not want to pay it all in one go, so incentivise them with a monthly payment plan. Like a loan add a little bit of interest on top and instead of getting £1000.00 back, get £220.00 back each month for 5 months. You can use a system like Go Cardless to set up a direct debit to collect the payments on your behalf.
You need to sort out your Cashflow
You want paying, so you need to make sure you are bringing in enough cash to pay yourself, so you can pay your own bills so you need to manage your cashflow.
When you first start a business it can be hard to get going and you may have to make some sacrifices in your personal spend, until you get to that point where you’re making more money so you can start spending on those luxuries again. It’s worth doing a personal cashflow plan to see how you spend your money, and look to see where you can make some cuts.