Are You Playing Banker With Your Business?

Are You Playing Banker With Your Business?

As an entrepreneur, your ultimate goal is to see your business prosper and to watch the profits soar as high as your dreams. But what happens when your sales are skyrocketing, yet your bank account tells a different story? Many business owners face this conundrum, which boils down to a simple yet critical question: Is your business inadvertently acting as a bank for your customers?

Let me paint a picture for you…

You’ve made the sale, your products or services have been delivered, and now you wait with bated breath for the payment that rightfully belongs to you. As days turn to weeks and weeks into months, that payment remains an elusive promise, leaving you in a precarious financial limbo.

This scenario is far from ideal. While securing a sale is a cause for celebration, it’s only half the victory. True success lies in having the cash to show for it and safely depositing it in your bank account. Unfortunately, the longer payments remain outstanding, the more challenging it becomes to collect. Customers may forget, businesses may encounter financial difficulties, disputes can arise, and before you know it, your hard-earned money is trapped in a limbo of unfulfilled promises.

I recently worked with a client who was facing this exact dilemma:

Their sales figures were impressive, and on paper, they were profitable. Yet, when it came to their cash flow, they were gasping for air, struggling to meet their own financial obligations. Upon closer examination, we discovered a staggering $70,000 in outstanding sales. Measured against their usual sales cycle, this represented about six weeks of sales, half of which were over 60 days overdue. It wasn’t just an alarm bell but a siren calling for immediate action.

We sprang into action, picking up the phone and diligently following up on every outstanding payment. Within a week, most of the money had been collected. This situation was a major wake-up call. It highlighted a significant flaw in their internal processes and procedures, which had allowed significant delays in payment collection to occur in the first place.

To prevent this from happening again, we took a hard look at our systems. We tightened credit limits and ensured payment terms were crystal clear to every customer. Moreover, we crafted polite yet firm scripts to remind customers of their obligations, reinforcing the importance of timely payments.

Remember the old adage: Sales is vanity, profit is sanity, but cash is king.

Your business doesn’t just need profits on paper; it needs actual cash to survive and thrive. The longer you wait, the harder it becomes to collect. It’s crucial to remember that you get what you tolerate. The stricter you are with your payment terms, the more likely you will see money in the bank where it belongs.

If you’re in a similar predicament and wondering why your profitability isn’t reflected in your bank balance, it’s time for us to talk. Click on the link below to schedule a chat, and unpack the strategies to tighten your debtor procedures and ensure you’re not inadvertently playing banker for your customers. Let’s work together to transform your outstanding sales into tangible cash that powers your business forward.

After all, cash isn’t just king—it’s the lifeblood of your enterprise!