Cash is King

Do you worry whether you’ll be able to meet your payroll or VAT obligations?

Do you have to take out funding to meet your end of year tax bills?

Do you dream about the day your debtors’ ledger and WIP turn into cash?

If so, you’re not alone. So many accountants have still not embraced direct debit to collect payments from clients. So many accountants build up WIP only to write it off.

Stop giving work away for free!

There is no reason why you should provide credit terms to clients. If you are doing the work, then you should be paid for it – if not in advance or whilst you’re doing it, then at the very least when the client picks up what they have asked you to do. Not 6 months later!

We collect 95% of our fees by direct debit. We have some who pay us in full annually IN ADVANCE. Those who pay by direct debit spread their fees over their financial year. So in essence they have already paid for their year-end accounts even before we’ve started them.

If clients want to work with you then they will agree to your payment terms. Do not be afraid to set out what these are. Those that don’t agree - you probably don’t want them as clients anyway.

How can you advise a client on improving cash flow through credit control when your business cannot control its own?! You will generate respect and credibility from a client when demonstrating that you have slick invoicing and payment collection systems in place.

Standing order Vs Direct Debit

We used to have clients on standing order. That was OK for cash collection, but it wasn’t great when we wanted to review client fees. The client was in control of changing a standing order. With direct debit you are in control.

As soon as you have agreed the fee increase – which you should be doing at least annually if only by inflation – then you can adjust the direct debit at your end.

Cash collection is part of your pricing strategy. Get your pricing right and then tie in your payment process when you are presenting your price to the client. By showing that the price will be 12 payments of £/$xx, then immediately you have shown that you intend to collect the payments each month.

Give choices to your clients

You can give a choice to the client – either spread the payment over 12 months or pay in advance with a small, say 5%, discount. By giving the client the choice, you put them in control of the buying decision – which means they are more likely to buy.

You will not know which of your clients will choose this option and it will surprise you. I quoted a full finance function service to a prospect which came out to around £35,000 in total. Given that my software gave the ability to offer a 5% discount to pay in advance, the client said he’d take it. That meant the full year’s fee in my bank account before we’d started any work.

Automate your invoicing and credit control as much as possible. Cloud accounting makes it possible to send out monthly invoices automatically against which payments received by direct debit can be matched.

If you’re new to the cloud space, then try it out on your practice first. Experiment with the monthly invoicing, integrating direct debit and payment solutions, and see how it all works to generate massive time savings for you. You can then start to roll it out and advise clients on the same. Why not delegate the research and implementation to a member of staff who’s ‘into’ technology?

Action point: Cash is king for every business. Make sure your cash position is strong so you can credibly advise clients on how to improve theirs.