Practical tips on managing your cash flow and getting clients to pay

There is one major issue that all practitioners seem to have at the moment and are asking for help with. This is cash flow. We all know that 'cash is King' and the lifeblood of all businesses, yet many practitioners are finding it a challenge at the moment and are having problems with clients paying for work done.

To help you I have listed below an easy to use 'top tips' checklist to work through and implement in your practice.Results are guaranteed and these systems have been proven to be successful and easy to out in place time and time again.

  • Cash flow for accountants comprises three things- debtors, work in progress and the bank account itself.
  • Look at your agreed debtors report. Be brutally honest and highlight potential bad debts and hand over to a debt collection agency. This can work well where you know you are unlikely to get the debtor to pay yourself.
  • Be strict with your credit control function and get someone other than a partner to regularly chase in money due.
  • Take a cold look at those late paying offending clients and ask yourself if you really want them as clients going forward.
  • If clients are late in paying, ask yourself 'why?. Do you have clear settlement terms that have been explained to the client ? Is here a reason why a client isn't paying- poor service levels perhaps ?
  • All clients should have fixed fees in place and agreed up front before you start any work and confirmed in writing.
  • It is now common for accountants not only to have fixed fee agreements in place but to also have standing orders or direct debits in place with clients. In many cases this will give you positive cash flow as clients are paying by instalments in advance of the bulk of the annual work being done.
  • Clients much prefer fixed fee agreements and paying in advance in instalments. it means there are no surprise large bills and they know exactly what they are paying for.
  • Extra work outside the remit of a fixed fee must be agreed with a client upfront and billed monthly at the latest.
  • You must carefully monitor and manage with your staff what work is included within a fixed fee and what work is deemed to be 'extra.'
  • Clients often don't pay because they are unhappy with the service received. Don't hide from this but address it head on. Identify the problem,apologise and put systems in place to learn and ensure it doesn't happen again.
  • Before starting any work review the quality of the records received and ensure they are in line with the basis upon which you have quoted the fee. If extra work is needed due to poor records then agree it with the client before hand. Leaving it until the final meeting is too late.
  • Look at your work in progress. Be honest with yourself- how much of it is really billable and recoverable ? Face the truth and bill it out or write it off.
  • When putting fixed fee agreements in place for the first time you will have to have a 3 pronged approach and talk to clients in person- you need to agree how they will settle any outstanding debtors balances, agree what you have to bill out from work in progress an dhow that will be paid and finally agree the fee for the year ahead and how it will be paid in advance by instalments. This does take time but reaps rewards very quickly.
  • Many practices follow the above systems and find that they have positive cash flow, a credit bank balance and negative work in progress within a few months. So it is worth the initial effort and breaking the pain barrier !
  • Turning to your bank account itself- look at your suppliers and agree early settlement discounts or spread annual payments wherever possible and practical.
  • Similarly, operate a tax reserve account where you 'put away' a monthly amount to cover future tax and VAT liabilities. This will help you plan your own cash flow more efficiently.

Ensuring clients are happy to pay you

  • Apart from fixed fee agreements and transparency about what you are going to charge, much depends on client service levels.
  • Ensure you operate a work planner and have systems in place to plan and agree the timing of getting work in and its completion.
  • The 3 month pre year end planning meeting is the critical point to agree fees for the year ahead with clients,schedule regular proactive advisory meetings and confirm job completion dates and final meetings all at the pre year end planning stage.
  • Continually seek clients feedback on what they think of your service levels. A key question to ask is 'on a score of 1-10 how do you rate what we are doing for you ?' Even if a client scores you a '9' ask 'what would we have to do to make that a '10?'
  • Ensure your A and B grade clients receive regular 'client care' calls from you and record the results. There is nothing a client loves more than to get a call from you just to see how they are and ask if there is anything they need help with.
  • When a client leaves you (sometimes for the right reasons) make sure you ask 'was there anything we could have done better?' This will help you learn from past mistakes and ensure you don't lose clients you wanted to keep whilst also ensuring you are more likely to get paid for work done.

Summary

Clients are just like you or me. We all like transparency about what we are paying and what it is exactly we will get in return and when it will be delivered. Plans sometimes have to change- that is life. As long as you call a client and explain why their accounts are taking longer than expected and you have to move the date of a final meeting, then they will remain happy as you have kept them in touch with what is going on and give them continued peace of mind. no one likes to feel forgotten about and we all know that bad feeling sets in whenever it is us, as a customer, that has to make a call to find out where something is.

I hope this overview provides you with practical pointers to help you improve your cash flow. Please e-mail me at finola@practice-perfect if you have any specific questions or want more detail on the points raised in this article.

 

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