Why Cranky Customers Can be Good for Small Business

Have you noticed that the number cranky customers is on the rise? This isn’t a huge surprise, since the current economic situation tends to make people testy about anything to do with money, including shipping fees, taxes, and product cost. And while it may be irritating to deal with unhappy customers, finding ways to soothe these customers can actually increase your small business profitability and generate customer loyalty in the long run.

Cranky Customers and Profitability: An Example
Recently I have had several interactions with cranky customers that has reshaped the way I handle customer service for my small businesses. In one case, a customer complained about the shipping cost for a single bottle of nutritional supplements he ordered from my small business website.

The bottle of supplements cost around $55 and the shipping ran about $8.50. The customer sent in a rude email complaining about the greed of my small business, and how my small business was taking unfair advantage of people suffering from economic woes by charging super-high shipping costs.

Unfortunately, being the distributor rather than the producer of this product, I wasn’t able to change the shipping charge. I sent the customer an email explaining this, and offering to send him a $5.00 check to ease the situation. After a few more grumpy emails back and forth, the customer finally realized that while my small business was not responsible for the actual shipping charge, I was offering to help.

When he finally understood the situation, he commented, “This says a lot about the integrity and helpfulness of your company. I will buy from you again.” While the $5.00 shipping reimbursement does cut into the profit margin for this single order, I now have a loyal customer who will shop with me again in the future. The value of that loyalty? Priceless!

Cranky Customers Just Need More Love
Everyone is under economic stress and, as a result, crankier than usual. If your small business encounters an unhappy customer, try this three step process to deflate the customer’s anger and create a loyal customer instead:

1. Realize it’s not personal. Everyone is under stress. Once you realize this, you won’t be as tempted to get angry.
2. Discover what the customer really wants. Try to see through all the bluster and find out what the customer is really asking for. Sometimes it’s just an apology, while other times it is a small token of appreciation, like the $5.00 shipping credit. In other words, most cranky customers feel bad (for whatever reason) and just need a little love.
3. Take necessary action promptly. Once you reach a mutually acceptable solution to the problem (even if the customer wants to return the product for a full refund), take action now. Prompt action is another way to show consideration, and will often create customer loyalty even if the current transaction does not reach completion.

We are building an incredible customer base by following these three steps. With many retail stores, banks, and other large organizations are “under the gun” and failing to offer customers any freebies, instant and friendly customer service from your small business can often garner you loyal customers who would normally shop with larger companies.

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Photo credit: Free Digital Photos

Tags: cranky customer, customer loyalty, small business, small business customer loyalty, small business owners

Small Business Owners: Do You Suck at Personal Finance? Go Scrooge Yourself

Asking if you suck at personal finance can seem insulting, but the question is not meant to be insulting. It’s just that, being a small business owner and having recently taken a deep look at my personal finances, I have to say that I suck at personal finance. A lot of my small business owner buddies do, too. How do I know this? Because we have all been taking the 30-Day Challenge by Ramit Sethi of the Scrooge Strategy, and it has been truly eye-opening.

What is the Scrooge Strategy 30-Day Challenge?
Basically, it’s an ebook written by national bestselling author Ramit Sethi. The challenge is to see if you can save $1,000 in 30 days by doing the steps in his ebook. There is one step per day.

There’s nothing really revelatory in the book but one message comes through loud and clear, especially for small business owners:

Most of us are far too busy maintaining our business finances that we let our personal finances fall by the wayside.

Or, to put it another way, we are too tired, lazy, or burned-out at the end of a business day to do the steps that Ramit suggests in his ebook. Being a small business owner can be difficult, and at the end of the day many of us want to take refuge in comfort rather than engage in the drudgery of personal finance.

An Enlightening Example of Why We Suck at Personal Finance
When it comes to saving money, most of what Ramit talks about is common sense. He calls it the “well, duh!” factor. An educated small business owner might read one of the personal finance tips, find it to be common sense, and say, “Well, duh! I already know that.” And that’s the end of it.

That’s all well and great, but just knowing about something and taking action are two completely different things. One example he gives in the book is pretty relevant as we move into winter and colder weather. One of his tips is to turn your thermostat down by three degrees to save money. He gives specific savings figures for several major cities so that you can estimate the amount of money you will probably save by turning down your thermostat.

Well, duh, right? OK, suppose you actually decide to turn down your thermostat. You bounce out of bed in the morning full of enthusiasm for saving money, and crank the sucker down by three degrees. Fabulous. Good for you.

Off you go to your small business, where you have a lousy day and waste lots of time fighting fires and producing little. You drag your butt home at night, feeling worn out and looking forward to a cozy evening on the couch with dinner and a glass of wine.

What a shocker when you open the front door and are greeted by the arctic temperatures inside your house. Oh yeah, you cranked your thermostat down by three degrees that morning. It seemed like such a good idea at the time. Now it seems like a totally lousy idea invented by a complete moron. You are tired, hungry, and not in the mood to suffer. You rush to the thermostat, turn the dial up to 85 degrees, and promise that you’ll do better tomorrow. In actuality, the thermostat stays at 85 degrees and never goes back down.

That’s what Ramit means about the “well, duh” factor. We know better than we act, and thus our personal finances suck the big one. To fix this problem, he suggests that we stack a fuzzy robe, hat, and warm slippers by the front door before we leave for work in the morning. That way, when we drag our butts home at night, we will not only be reminded of why we turned the thermostat down, but we will have some immediate warmth to help us get through the shock of the cold air inside the house.

What’s the Moral of This Story?
The moral of this story is that if you are like most small business owners, you work yourself to the bone to squeeze the maximum profit out of your business, only to squander it with lousy personal finance skills.

Hmmm … sounds like a quandary to me. After all, why am I busting my butt at work only to end up with very little to show at the end of the day, week, month, or year? That seems silly. I might as well quit my small business, flip burgers for a living, and use some savvier personal finance skills to get ahead.

That’s why the Scrooge Strategy ebook has been so valuable to me. It helps me retain more of what I earn through my small business. Sound like a good idea to you? You can download the book for free and read it for 30 days. If you hate it, you don’t get charged. If you love it, there’s a one time charge of around $28. It’s been a heckuva deal for this small biz owner.

Check out the Scrooge Strategy for yourself here.

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Tags: personal finance, Ramit Sethi, Scrooge Strategy, small business, small business owners

The Art of Monkishness for the Small Business Owner

Adrian Monk is one of my favorite characters on television, probably because my husband resembles him so much … everything has to be “just so”! I catch reruns of “Monk” on the tube at least once a week, and I love how he uses his OCD mind, which is truly detail-oriented, to solve crimes. It has occurred to me more than once that small business owners could benefit from a little Monkishness to create a more efficient and productive business.

Small Business Owners and Adrian Monk
It’s true that Monk’s OCD tends to hinder rather than help him on a daily basis, since he spends so much time staying sanitary and clean. However, his “devil is in the details” approach is pretty useful for the small business owner.

Why? Well, think about this. How time do you spend looking for stuff (files, documents, phone numbers, etc.) that you’ve misplaced somewhere? How often do you dig around trying to find a business card? How many times have you tried to find that important email in the masses of them stacked in your inbox?

If you are like the typical small business owner, the answer is clear: a lot! The typical small business owner is a business-savvy risk taker who is adventurous but not necessarily organized. Lack of organization results in a lot of wasted time.

A Monkish Example
Let me give you a simple example. At the moment we are in Cancun, vacationing for 5 weeks. We have digital room keys. The first few days, I just carelessly laid my room key anywhere that was handy, often dropping it, along with sunglasses, sunscreen, and lip balm, on the counter or night stand. Sometimes I left it on the kitchen counter or dining room table of our condo. Wherever.

Those few days I spent at least 15 minutes per day looking for that darned key! Not that it makes a big difference on vacation, but it illustrated an important point: not knowing where stuff is wastes a lot of time!

My husband and I decided after a few days to always put our room keys on top of the television so we wouldn’t waste time looking for them. After all, looking for our keys one day made us late for a taco party!

Tools for the Monkish Small Business Owner
Misplacing a room key is a small matter, but throw a few of these “time wasters” into your business day and you’ll easily lose an hour or more hunting down stuff that should be at your fingertips. Luckily, there are a number of useful tools for the small business owner who wants to be more like Adrian Monk. Here are a few of my favorites.

Password Agent
This encrypted software safely stores your login and password information, as well as notes about anything important. If you are like the average small business owner, then your online accounts abound. With this software, when you need to login to a website, all you have to do is open it and access your login information. Because this software is encrypted and lives on your computer rather than in your browser, it gives you an added layer of protection. This software comes in a free “Lite” version, which allows you to store a limited number of records, or a full version which gives you unlimited records. Free downloads are available at Tucows and other software download sites.

Chaos Intellect
I recently purchased this software for contact management and email list management. The software is quite inexpensive and allows you to easily store contact information about customers, vendors, and business partners. Best of all, it allows you to easily group contacts and send emails to entire groups at a time. The email-sending function on this software throttles the sending speed, so you don’t overwhelm your email server. Finally, contact records are linked to documents, emails, and any other form of correspondence, so that each contact record automatically stores a full record of every email or piece of correspondence sent. Compared to better-known but costlier contact management software programs, this program is a good buy.

Memo to Me
I love this online software because through it I can program email reminders to myself, daily, weekly, monthly, yearly, or on a specific date. I don’t like to have “reminder software” running in the background because it often eats up RAM, but having reminders come through email is convenient, since I check email at least twice a day. The software is available for an inexpensive subscription fee or you can get the free lite version.

I adore all three of these software programs because they keep all my necessary information at my fingertips. If you’ve got some nifty tools that help you be a more Monkish small business owner, I’d love to hear about it. As always, the pursuit of a more productive business life that allows more time for fun is ongoing!

P.S. If you’d like to know why I’m down in Cancun, Mexico for five weeks (and how I afford it), drop me a line. I love to connect with people about this!

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Photo credit: http://www.flickr.com/photos/kinghuang/ / CC BY 2.0

Tags: Adrian Monk, small business, small business owners, software for small business owners

How to be an Efficient Little Twerp in Small Business

I’m kind of a manic-depressive small business owner, sometimes super-focused and other times distracted to pieces … not a good personality type for running a small business. I figured this out about myself a long time ago and realized that the only way I would ever succeed in small business is to become this:

An efficient little twerp.

What’s an Efficient Little Twerp?
“Efficient little twerp” is the phrase a friend recently used to describe me in the way that I run my small businesses. Being an efficient little twerp is how I manage to be successful in my small businesses despite my major personality flaws, and boils down to three things:

1. Being good or hiring someone better.
2. Knowing the devil is in the details.
3. Accepting AFGOs as part of business (Another Friggin’ Growth Opportunity)

So these three things make me an efficient little twerp and allow my small businesses to run smoothly. They might help you, too, if you run small businesses and suffer from some sort of personality flaws. For instance, manic-depressive cycles are just one of mine. I’m also a lazy, arrogant, in need of external validation, and a host of other foibles. Any of these sound familiar to you? In any case, here are three little rules to being an efficient little twerp in small business that may help.

1. Being Good or Hiring Someone Better
If small business owners are to be faulted in one major area, it’s usually that we believe we are super-heroes and can do EVERYTHING for our businesses. Not only can we do our main area of expertise, but feel we can also do marketing, strategizing, bookkeeping and accounting, customer relations, business development, legal work, and heavy lifting.

Not gonna happen.

We may be able to do all of these things, but chances are that we won’t do all of them well. Part of being an effective little twerp in small business is figuring out what you’re good at, and hiring people to do the rest.

For instance, I’m fairly good at writing, marketing, and online interaction. I suck at legal work, accounting, and phone-based customer support. These I hire out to people, which makes me sane, allows my business to run smoothly, and, of course, makes me the efficient little twerp that I am.

2. Knowing the Devil is in the Details
Having just said that I hire out the work at which I’m not very proficient, I have to now add a caveat. To be an efficient little twerp, I also have to understand something about the work that I’m outsourcing the others. I have to understand the details of the work I hire out, even if I don’t do it myself.

Here’s a prime example: a week before corporate taxes were due, my current accountant (not the new one I’m going with in the coming year) call me up and tell me I owe a few grand in corporate taxes. This did not sound in the least correct to me. I had sent in a payment with my extension early in the year, and didn’t understand why the taxes I still owed were so much higher than the extension. Having done my own corporate taxes for a few years, I smelled a rat.

Instead of just “rolling with the punches,” I pulled up the tax figures I had sent to the accountant and compared them to the corporate return. Bingo. I caught an accounting error where a few income sources had been doubled, which accounted for the major tax I supposedly owed. I called the accountant, got it straightened out, and now have a tax credit.

So even though I hire out my accounting work (because I know I can’t keep up with current tax law), I know enough about HOW small business accounting works to know when something is wrong. The devil is in the details, and this case, not knowing the details could have cost my business a few thousand in unnecessary taxes. Sure, I would have eventually gotten a refund, but why pay the government unnecessarily in this cash-tight economy? Now that would not be typical “efficient little twerp” behavior.

3. Accepting AFGOs as Part of Business
This is a PG-rated article, so I can’t say what AFGO really stands for, but Another Friggin’ Growth Opportunity kind of gives you the idea, right? Part of being an efficient little small business twerp is figuring out when you’ve made a gaffe, learning from it, and then moving on.

A lot of small business owners are good at figuring out that they’ve screwed up, but then they stay in “screw up land” forever. So you screwed up. Big deal. Learn from it and move on. The other day I got myself banned from an online site. Bummer … my online marketing activities really took a hit. I researched the steps needed to get unbanned, but after reading what everyone else had to say, realized that it wasn’t going to be possible in the short term. So what’s an efficient little twerp to do? Move on. There are lots of branches on the online marketing tree, so if one branch gets chopped of, just focus on some other branches for a while. No biggie and no only. It’s how I learn to better run and promote my small businesses. AFGO. It’s a good thing. Really. And every efficient little twerp not only accepts them, but eventually learns to welcome them.

I hope this small rant on the three rules I’ve discovered about being an efficient little twerp in business may in some way bring a smile to your face, give you a giggle, and maybe even help out a bit!

If you have any suggestions on being a twerp, or otherwise running a small business better, cheaper, or more enjoyably, please, leave a comment. I’d love to hear!

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Tags: efficient little twerp, small business, small business owner

3 Time Management Tips for Small Business Owners

Time is one of the most precious commodities for a small business owner. Between business development, client work, employee or contract worker management, marketing, and fire-fighting, there’s hardly enough time for coffee and bathroom breaks.

In fact, recent studies show that time management issues are among the main obstacles to small business owners being successful and keeping the doors to their businesses open. So what’s a small business owner to do? Here are some time management tips I recently gathered from a workshop sponsored by my local chamber of commerce.

Tip #1 - Decide What is Important
Most small business owners go to the office and fall into a black hole of disorganized chaos from which they emerge, sometime late in the day, having done a lot but made questionable progress towards definite goals. The time management expert at the seminar suggested that we small business owners plan our work weeks before they start … like on Friday afternoon or during the weekend.

We should decide what major goals we wanted to accomplish during the week, and what amount of time we were willing to commit to each goal. Then we need to schedule that time into our calendars, carving chunks of time when we did not allow disturbances like phone calls or checking email.

Tip #2 - Check the Calendar
A calendar is only useful if you check it and follow it. The time management expert stressed that while some small business owners are good at making plans for the week, they are terrible at following those plans. She suggested we check our calendars first thing in the morning, mid-morning, at lunch, mid-afternoon, and at the end of the time. While this may seem a little anal retentive or remind us too much of Adrian Monk, it seems that most small business owners easily get derailed without this level of persistent checking. So make your calendar, and then check, double-check, and triple-check to make sure you are following it.

Tip #3 - Avoid Fire-Fighting
I love this part. The time management expert gave us a mantra: “A lack of planning on someone else’s part does not constitute an emergency on your part.” I like this. Small business owners who do their own planning usually end up fighting fires because someone else forgot to plan. Whether it is a client, an employee, a friend, or a business partner who forgot to plan, learn to ignore it. Follow your own calendar because fire-fighting equals lost time, which means poor productivity on your part. Unless the emergency means a loss of thousands of dollars of revenue, learn to walk away!

There were a lot of other time management tips offered at this seminar, but these three seemed to be the most relevant and interesting, hence they are included here.

Do you have some time management tips to share with small business owners? If so, please share!

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Photo credit: http://www.flickr.com/photos/aarongeller/ / CC BY 2.0

Tags: small business, small business owners, time management tips

Do a Dreaded Task per Week - Improve Work Productivity, Decrease Procrastination

Doing a dreaded task once a week is a big time key to success in business and in life. Now don’t get me wrong … most of the time I’m a huge believer in positive thinking and an enthusiastic outlook on life. But, like most people, there are certain tasks associated with my business that I dread. I’d rather muck horse manure for 8 hours straight than do some of these tasks. I’d rather join Mike Rowe for a stint on “Dirty Jobs” than tackle these dreaded tasks. And that’s silly, considering that most of these tasks take an hour or two to complete. Can you say procrastination?

Why Doing a Dreaded Task Weekly Improves Work Productivity
There are many reasons that simply facing and doing a dreaded task is a huge key to success. There is, of course, the common sense reason that the dreaded task usually must be done. It is a requirement. It’s not a “want to” kind of thing.

For instance, in business, this might be something as monotonous and regular as calculating and paying the quarterly sales tax for your business. Is it hard to do? No. Is it boring? Hell yes. Is it easy to get distracted? Totally! And yet, if it doesn’t get done the penalties are, well, unpleasant to say the least. You have to pay a fine, for one thing, and then there’s the extra paperwork that has to be submitted in triplicate with the fine. And that doesn’t even cover the humiliation of being called on the carpet by the state government. Yuck. So on a common sense level, doing the dreaded task is a good thing. Procrastination is a bad thing.

On a psychological level, doing a dreaded task gives you the equivalent psychological satisfaction as finally cleaning out your sock drawer and throwing away all the lonesome socks that have lost their mates. Vacuuming the lint receptacle in your clothes dryer runs a close second in terms of psychological satisfaction. And when you are a psychologically satisfied small business owner, your work productivity is sky high. Your employees will breathe a sigh a relief, thereby saving you from some kind of random employee-generated harassment lawsuit that might otherwise come out of the blue.

Then there’s the third reason to do a dreaded task rather than fall back on procrastination: it will save you time later. Here’s a perfect example of this. For a long time now I’ve needed to upgrade my contact management software. I needed something that included some more up-to-date features, like mail merge, integration with document and financial software, and the ability to handle multiple client contact lists. I had avoided researching, buying, and installing such software because it required a lot of focused attention from me. You know, some days as a business owner I get up on the wrong side of the bed, and I’d rather be flipping hamburgers for a living than running a business.

But after a lot of “I’d rather be flipping burgers” procrastination days, I finally got around to researching and installing said software. True, when all was said and done, and the software was installed with the data fully migrated, I ended up investing about 12 hours into the project. But boy was it ever worth it. With a couple of clicks of my mouse, I can select a financial document, share it with select contacts, monitor their reply, and have an auto-response waiting in the wings. It takes all of 3 minutes to do all of that. So for 12 hours of dreaded activity, I have a future of efficient work … which is good ’cause I get up wanting to be the hamburger girl pretty often these days.

Pick Your Dreaded Task of the Week
Every single Sunday, yes that lovely Sabbath before the hectic work week begins, I take a few minutes to contemplate my dreaded activity of the week. I’ve gotten so used to this that I actually look upon this choice as a kind of torturous meditation. It’s like the medicine your mom used to give you — it tastes so bad but the results are soooo good. So I pick my task, and I put that task on my calendar, with a big “D” next to it, for the word Dread. Then, when the appointed day comes around, I do the dreaded task. I grunt, groan, moan, and complain, but it has netted some spectacular results in the work productivity department. I’ve done this for long enough now that people close to me know what when D-day hits, they should leave the office until I’m done.

Now doesn’t that sound like fun? Have you got a big D that you do every week? What kinds of things make your Dread List? Drop me a line — I always take comfort in that sort of communication because, as you well know, misery loves company!

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Photo credit: http://www.flickr.com/photos/sunshinecity/ / CC BY 2.0

Tags: procrastination problem, productivity solutions, small business

Alternative Ways to Avoid the Cash Flow Crunch for Small Businesses

In my last few blog posts I’ve highlighted different ways that small business can increase their cash flow, with strategies that vary from bartering with other companies to turning away slow/no pay clients. Here’s a list of those blog posts in case you want to know more about ways to bring more cash into your small business:

3 Ways to Beat the Small Business Cash Flow Crunch
3 More Ways to Beat the Small Business Cash Flow Crunch
4 Ways to Decrease Small Business Overhead and Increase Cash
Small Business Cash Flow - Collect Early or Don’t Collect at All

In this blog post, I explore some more adventurous alternative ways that small business owners are discovering for avoiding the cash flow crunch.

Adventurous Ways to Avoid the Cash Flow Crunch
The methods I discussed in my previous blog posts are fairly common sense and standard; ask any good accountant and you’ll get some, if not all, of these suggestions. The two methods I cover in this blog post are less standard, and you may or may not have heard of them. Even if you have heard of them, you may not have considered them as viable options for you. But with the economy being the roller coaster that it is right now, you may want to keep your options open. So what are these two adventurous options?

- Factoring
- Creating Multiple Streams of Income

Here’s an overview of these two options so you can start wrapping your mind around them.

Factoring
The word “factoring” doesn’t give you much detail about this option, but it can give your business a boost if you are suffering from constipation in the cash department. With factoring, you sell your accounts receivable to a factoring company, which is usually a bank or a commercial finance company. When you sell your company’s receivables, you get cold hard cash. It is then up to the factoring company to collect cash from the clients who owe money.

The good news is that factoring is becoming more popular and more possible for small business. Previously, if you small business owned less than $10,000 in accounts receivables, a factoring company would not consider working with you. These days, factoring companies are willing to be more flexible. According to the president of one factoring company, only three percent of all small business that are eligible for factoring are even aware that this is an option to generate cash for the business.

Now for the bad news. As with any finance option, you pay a price for getting cold hard cash. The average fee is 5% per month of the total receivables amount, and the factoring company may not accept receivables with payment terms of longer than 90 days. In addition, you run the risk of angering clients if the factoring company resorts to harsh measures to collect their cash. Factoring gives you a definite cash option that you may want to consider, depending on how strapped your small business is for greenbacks.

Creating Multiple Streams of Income
Popularized by Robert Allen and other authors, the creation of multiple streams of income is the new frontier for entrepreneurs and small business owners. Whether this means becoming a shareholder in other companies, creating a new line of electronic products that can be digitally delivered, or doing pure investing, these days small business owners are gathering income streams from diverse markets for financial stability.

The bad news is, of course, that in a cash-poor economy you might not have cash on hand to invest in real estate or other companies (the whole goal being to bring cash in, not spend it).

The good news is that you have other assets that you might be able to convert into alternate streams of income, aside from what your small business currently brings in. For instance, as an entrepreneur you have knowledge, experience, skills, and talent. These intellectual assets are all inside your brain and, for you, free for the taking. The question then becomes, how can you turn those assets into products you can sell for an additional stream of income? Additionally, can you turn one of your company’s physical products into a digital one? Here are some of low-cash sweat-equity ways small business owners are cashing in on multiple streams of income. They are using their own knowledge plus the intellectual and physical assets in their small businesses to sell:

- educational DVDs, CDs, and ebooks
- memberships to websites and webinars
- online consulting (fixed price for a fixed job)
- networking events to match businesses with each other
- affiliate programs

Does this spark any ideas in your brilliant mind as to how you might turn your own or your small business’ assets into a new stream of income?

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Photo credit: jungledrumsonline

Tags: cash flow, factoring, multiple streams of income, small business

Small Business Cash Flow: Understanding When the Crunch Happens

In the last few blog posts I’ve talked about ways to reduce the cash leaving your small business and increase the cash coming in. In other words, these are all methods to shrink the cash flow gap.

I just read a case study (on the Business Owner’s Toolkit website) that gives a really interesting perspective on the cash flow gap. This case study profiles a small business that makes custom furniture, and tracks the cash flow in and out of the business as the owner creates a custom dining room table.

A picture is always worth a thousand words, and the bar graph that goes with the case study is priceless. It tracks, over the duration of the job (67 days), both the cumulative cash flow and the company’s check register. You can easily see where the cash flow crunch occurs. It happens over and over again, with the cash flow going negative on day 13 and not hitting the black again until day 67. Ouch! That’s 54 days of operating in the red.

This case study really gives you a picture of why cash flow is so important to a small business, and how easily your business might be operating in the red even if your accounts receivables look healthy. Read the whole case study here, and then take a look at your own small business’ cash flow picture:

Case Study: The Cash Flow Gap

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Photo credit:  Cash flow

Tags: cash flow gap, small business

3 More Ways to Beat the Small Business Cash Flow Crunch

In my last blog post I talked about three simple ways to improve your small business’ cash flow, including prompt billing, avoiding slow and no-pay customers, and asking for your cash sooner.

Now I have three more ways you can increase the cash flow. More specifically, these methods help you turn accounts receivables into cold hard cash that your small business can use today.

3 More Ways to Increase Cash Flow Into Your Small Business

Some of these cash flow strategies may take a little time to set up, but you’ll find that the resulting positive cash flow will be worth the effort. By implementing these strategies, you’ll be joining the thousands are small business owners who are looking at resourceful ways to get paid sooner.

1. Make It Easy for Your Clients to Pay
It’s only logical that your clients will pay you sooner if you make it easy for them. Here’s how. First, when you establish a relationship with a client, state your payment terms and options up front. Let your clients know whether you accept cash, checks, credit cards, and online payments.

Second, start accepting credit cards. As your clients begin experiencing their own cash flow crunches, they will want to manage their cash flow by using credit cards to pay for services. By accepting credit cards, you will increase your chances of being paid in a timely fashion. These days, small businesses ranging from plumbers to accountants are accepting credit cards–and seeing an upsurge of cash flow as a result. Although you will have to pay 1-3% to a credit card processor, the increase in your small business cash flow make the fees worth paying. Remember that 90% of business failures are due to cash flow.

Third, consider accepting online payments through services such as PayPal, Verisign, Quickbooks, or Authorize.net. Your clients are every bit as busy as you, and by allowing them to pay online, you allow them to handle payment at a convenient time, which may not be during regular business hours.

2. Don’t Be Afraid to Ask for Your Money
Studies show that friendly reminders, along the lines of, “Did you get my bill and when can I expect payment?” can significantly increase payment rates. Before you start asking for payment, be sure that you have made your payment terms clear at the outset of your relationships with your clients. Next, use software to track the age of various accounts receivables so that you can easily list late-paying clients, and start calling with friendly reminders. Finally, if necessary, consider using an outside collection agency for extremely delinquent accounts. Use this option with caution, as you may negatively impact your business relationship with your late-paying clients, or others who know those clients.

3. Balance Your Client Base for Steady Cash Flow
Depending on how you typically bill for products or services in your business, you can create a steadier cash flow by using different payment structures for different clients. For instance, if your business is seasonal or experiences fluctuations in cash flow, consider switching some clients over to a retainer-basis so that the monthly cash flow is steadier. With a retainer, you offer your client a certain amount of products or services for a fixed fee per month. To encourage clients to switch over to this method, consider throwing some bonus products or services into the mix or offering a slight discount. While this might cut into your profit margin a bit, you will get the benefit of steadier cash flow every month.

It can take some time to implement these strategies. For instance, if you decide to accept credit card payments, you will need to set your business up with a merchant services company. Similarly, if you choose to move some of your clients to a retainer basis, you’ll need to spend some quality time with those clients to persuade them that a retainer is a win-win solution. However, you’ll find that if you invest this time and effort up front, your bank balance will reflect a much healthier cash flow, which is crucial in today’s tough economic times.

Have you got some resourceful methods for increasing the cash flow into your small business? Care to share?

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Tags: billing, business failure, increasing cash flow, payment terms, small business

3 Ways to Beat the Small Business Cash Flow Crunch

What do 90% of business failures have in common?

Lack of cash.

Cash is king. According to Dun and Bradstreet, 90% of business failures happen because of poor cash flow. In today’s fragile economy, maintaining a strong positive cash flow for your small business is more important than ever.

Cash Flow Basics for Small Business

Well, duh, right? Any high school economics student can tell you positive cash flow is important to a small business. But knowing about cash flow and keeping a positive cash flow for your business are two different things. So what do you need to consider when it comes to your business’ cash flow? Three factors affect cash flow:

- Accounts Receivable (cash flowing into your business)
- Accounts Payable (cash flowing out of your business)
- Overhead Expenses (a subset of accounts payable)

In this article I give you three ways to increase the cash flow into your business.

3 Ways to Increase Cash Flow into Your Business

If you accounts receivable records look good, your business cash flow should be good, right? Wrong. A positive accounts receivable column only helps your business if you can convert your receivables to cash. Your business’ accounts receivable is a listing of money owed to your company. But being owed and having cash in hand are two different things. So how do you turn accounts receivable into cash faster for your small business?

1. Bill Promptly and Accurately
Another “Duh!” suggestion, but you might be surprised at how many small business owners are guilty of neglecting regular and prompt billing, viewing it as another paperwork hassle that goes on the back burner. If your small business doesn’t bill promptly, start now. Assign an employee to handle this task if necessary. When working on long-term projects, arrange to bill monthly for work-in-progress and ask for a deposit before you start the project. Also, be very careful and detailed in your billing. Nothing strains a good business relationship like billing errors. Review your bills for errors and omissions before sending them out.

2. Avoid Slow or No-Pay Clients
You might be amazed at the kinds of clients who are slow to pay, or totally delinquent. According to Dun and Bradstreet, the worst slow-pay offenders are large businesses, those with 500 employees or more. On average, these businesses take 62.7 days to pay up, more than 4 weeks past normal 30-day terms. Here’s the other shocker: the most common no-pay offenders are clients who owe $500 or less. Apparently, these clients feel that this amount of cash is insignificant, and don’t feel guilty about not paying up.

Before you take on a new client or extend credit to a client, do your homework. You can do a credit check on all new clients using an outside agency, or request credit references and do your own checking. Another option is to call other businesses that do business with your client to learn whether the client pays on time. If the potential client turns out to be the slow/no pay type, don’t take them on. In lean economic times it may seem crazy not to accept all the business you can get, but clients who don’t pay up can seriously and negatively affect your cash flow. Not only will you wait endlessly to get paid for goods and services already delivered, but you will also spend a lot of internal resources tracking delinquent accounts and chasing your cash. The best policy is: “Just say no!”

3. Plan for Fast Cash
There are two ways to get your clients to pay up sooner. First, you can negotiate short payment terms when you contract with a client. These days, many small businesses are asking for and getting “net 15″ terms. See which if your clients might be open to these terms. Second, if you’re not comfortable asking for “net 15″ terms, you can offer clients a discount for early payment. Offer a one to two percent discount for paying within 10 days. While you’ll be losing a little cash to the discount, you’re overall cash balance will be a lot healthier.

These three simple strategies for cash flow management can be the difference between your small business operating in the black or becoming one of the business in the 90% failure bracket.

Do you have your own unique ways of preserving or increasing the cash flow into your business?

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Photo credit: Stimulus Package

Tags: billing, business failure, increasing cash flow, payment terms, small business