Lack of cash is the biggest barrier we have found for firms who want to scale up to be a one million pound firm. Reducing WIP is a great way to increase your cash flow. Part of the core philosophy of The Accountants Millionaires' Club is to get your clients to pay monthly by direct debit for the standard on-going compliance work they buy from you. But what if you've already got your clients paying monthly by direct debit. What else can you do to reduce your WIP? What about the one-off stuff you do for them, the work that isn't covered in their standard monthly payment to you? The work which actually can make a real difference to reducing WIP, and increase your cash flow and profitability if you get it paid promptly.
Reducing WIP: 10 ways of getting your ad hoc bills paid quicker
Here are 10 thoughts on getting your ad hoc bills paid quicker:
- When you are negotiating the fee level for the ad hoc work, negotiate the payment terms upfront and implication of paying late or wanting longer payment terms than your normal.
- Set your payment terms to 15 days, which means you should get paid in 30 days. (I know simple stuff, but why should you give your clients 30 days or more of credit?)
- As you send an invoice, ring up your contact at the client and let them know it's coming and ask then when the client expects to pay the bill.
- Chase up late payers. Sometimes it can be as simple as an invoice going missing in the system, sometimes it's a client who needs to be chased to pay the bill.
- Make sure the fee earner who raises the bill has a relationship with the person at your clients' organisation who is responsible for approving and paying the bill.
- Make sure that your fee earners know that if they raise an invoice it's their responsibility to get it paid
- Ask for some payment upfront for big jobs or new clients or really any ad hoc job!
- 5 days before an invoice is due, call the client to check everything was OK with the invoice
- If you have a long outstanding debt consider outsourcing it to a debt collection agency.
- Have a payment strategy for clients in place. (i.e when a bill becomes overdue by a certain amount it will trigger a series of events; phone call to client, formal letter to client, small claims court proceedings notice)
If you want more advice on reducing WIP in your firm read 3 ways to cut your WIP and lock up.
Keep cash flow in focus at your firm
One last one that I'd add is about creating the right focus on this problem. If you leave these ad hoc bills they don't get paid on time by themselves. It takes a whole firm focus. This is why we recommend in your "numbers that matter" you include debtor days and cash flow survival time. These numbers should be reviewed every week as part of your "making stuff happen" meeting rhythm.