“The more your money works for you, the less you have to work for money.”– Idowu Koyenikan
One thing that I’ve learned from businesses, and my own, is that Accounts Receivable is the absolute life force of a company. Cash Flow is king and without money coming in, it makes it incredibly hard to issue payment for business expenses such as rent, utilities, or even product. In these times of social distancing and Covid-19 more and more businesses are experiencing the issue of cash flow. Due to entire industries being shut down, suppliers are waiting to get paid by their customers, along with everyone else part of the process. So if you’re a business what should you do if your customer or client cannot issue payment? Do you send them to 3rd party collections or a legal counsel; or is there a better way of handling? In today’s blog I’m going to discuss what to do if a customer communicates that they cannot issue payment.
Give Them Options – You’d be surprised how many businesses give their customer’s limited options when it comes to payment. However when a customer expresses a hardship, giving options could be the catalyst to getting you paid. Some options I think all businesses should offer are ACH/Wire (electronic payment), credit card, and check. In these times it’s ok to get creative, in many instances credit card payments might come with heavy processing fees, think outside the box to use services such as google pay or even Venmo. Keep in mind that it’s possible your customer might not be able to pay the full amount of your invoice. If that’s the case I urge you to get creative by establishing a payment plan, or discount. The objective here is to continue your business’s cash flow. Many businesses are going to need to tighten up on their expenditures, however, by working with your customers you are receiving cash flow for your business and also strengthening the relationship with your customer.
Provide Education – There are many small businesses who are having difficulty paying their expenses right now. A way to strengthen your partnership AND get you paid is to educate your customer. Specifically during this time with COVID 19 you can do a little research and educate your customer on what resources are available to them in the form of funding from the government. For example The Paycheck Protection Program as stated by the Small Business Administration “The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.” Imagine if you could educate your customers that instead of choosing whether to pay their employees or pay you they can have both! Education is powerful and is a great way to help your own receivables.
Get Creative – Being an optimist I have an intrinsic belief that most customers want to issue payment. It’s just the way of the world. If no one wanted to pay anyone, free enterprise as we know it wouldn’t exist. So when you take the thought that “my customers want to pay” they just can’t right now; how should you respond to that? A thought might be to barter services, so then you don’t need to cut them off as a customer however if they do a good job, your business doesn’t need to slow down; essentially you’d be getting a free service from your customer in return for the capital they owe you. Another creative option, depending on your customer, might be to partner with them. For example perhaps your customer is a start-up who has fallen on hard times, if you are in a place of strength in your business you might be able to negotiate equity or ownership in their business for a return for debt forgiveness. If the company has promising potential you could not only be making a great return but investing in an asset as well.
Conclusion – During these times many unprecedented and unexpected things will happen. However if a business can keep their receivables afloat they will weather the storm. Yet keeping the constant influx of cash flow during these times requires understanding, innovation, and providing options to your customers. If you can achieve and execute in these areas your business will continue to operate from a place of strength.