What is your payment term? Less than 15 days?
Excellent. 30, 60 or even 90 days? Then it's time for action. Because it is unbelievable how some companies deal with their suppliers when it comes to payment.
And governments are even the worst payers in the Netherlands. What would it be like to never have to worry about payment terms, debtor management and pre-financing people and resources?
The solution is simple: payment in advance.
Debtor management and direct debit
It is of vital importance for any organization to have access to sufficient funds. No matter how fast your turnover and order numbers grow, you have a problem if your cash dries up. You just have to keep paying salaries, rent and raw materials.
That is why good cash flow management is crucial. This can take the form of active debtor management. This allows you to keep your organization fit and healthy. But why not take it a step further? Let your customers pay in advance. Then you don't even have debtors to manage.
Prepayment is not that bad at all
Many people find prepayment inappropriate. It is not customer-friendly, it drives customers away, customers do not accept it… The opposite appears to be true. This is a typical case of 'We've always done it this way, so why should we do it differently?'. In reality, it's not such a bad idea to let your customers pay in advance.
The supermarket and the insurer do it too
There are countless examples of prepayment in our daily lives. How would the supermarket cashier react if you suddenly suggested that you come back in 30 days for the payment?
And how is the payment of your mortgage, rental contract and health insurance arranged? Probably via direct debit. That is quite normal, whether it concerns a product or service.
For example, an independent trainer of Kenneth Smit recently said that he always invoices his training far in advance. His motivation: “Since my customers pay in advance, I have much fewer cancellations or relocations.
After all, the customer has already paid for the service. It no longer hurts me to resist, because I already have the money in my account.”
Software companies are also increasingly switching to prepayment. This makes pre-financing costs for hosting and support a thing of the past.
How do you start with prepayment?
If you get a new customer, you can immediately start with prepayment. Make sure you update your terms and conditions so that they unambiguously and clearly describe how it works and what the rules of the game are.
It is not customer friendly towards your existing customers to switch to prepayment without informing them in a timely and careful manner. The first day of the new year is a good time to start.
For example, by sending a message in October and/or reporting the new working method in a conversation, and sending another reminder in December, your customers can prepare for the change. Maybe you can even make a gesture to show your goodwill. For example, by not indexing prices for a year, or less.
It is also a good time to see how valuable your customer is. Is the customer value low, so wouldn't you mind if you lost that one customer? Then immediately switch to prepayment.
Bee strategic customers or development customers is it worth coming up with a smart approach. But have the guts!
Dare to grab. Bite through the sour apple so you can move forward.
It will bring you a lot of financial peace.
