Leadership Magazine: Why consistency is crucial

July 2016's Leadership Magazine article is on page 70 and 71

Cash Glow™ Cash is King

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IMMEDIATE RELEASE                                                                                            17 June 2015

Don’t count your check-ins before they cash ~ Vanna Bonta

Isn’t it frustrating when you have to pay for your parking ticket and you are a Rand short and the pay point does not accept card payments. To then track down an ATM to draw money is hugely inconvenient, not to mention the walk of shame when there are people behind you in the queue. It would have been so much better if you had planned properly and drawn money when you had the chance. Similarly, when it comes to your company’s finances, it is about planning properly; just as you need cash in your wallet for unforeseen circumstances, you need to make sure that you have sufficient funds in the bank account to pay your expenses. Cash flow is the lifeblood for the sustainability of any organisation, and a building block that forms part of an organisation’s reputation.

Sounds easy right? Yes, but surprisingly it is not always that simple.

To have money in the bank you need to get paid for your product or service offering, and to get paid you need to ensure that your offering is seen to be creating value for your stakeholders; you also need to have systems in place to get payments in.

To build your reputation, customers need to recognise the value in what you have to offer and must want to and be able to spend their hard earned cash on your offering instead of the competition. The higher people regard this value and return on their spend, the more likely they will be to invest in it and remain loyal customers in the long run, which all contributes to your reputation at the end of the day.  

It is all a balancing act and the crux of it is about consistency across the whole business. Yes, gaining customer loyalty is essential; however when it comes to building a reputation it is crucial to maintain the quality across all the different divisions and business units for all the stakeholders that are associated with the organisation. In other words, the way that you treat and value your customers need to be the same as the way that you treat and value your suppliers, partners and sponsors.

This is very often where companies get it wrong, and where corporate South Africa falls short. They deliver amazing products and services and invest in huge budget campaigns to set themselves apart from their competition and are quick off the mark to respond to negative social media posts. But, they forget about their other stakeholders, such as their suppliers and don’t think about the impact that their policies and payment terms have on them. We have all heard and read a lot about corporates wanting to invest in and support SMME’s. In theory this is great; the snag is that more often than not, the payment terms are unrealistic. We have recently worked with a large organisation that I have always had a very high regard for in terms of the service that they deliver and the way that they engage with their customers; however, being on the other side of the coin as a service provider has definitely dented my view of them. Their 30 days payment terms is a standard agreement that I respect, however our invoice got ‘lost’ in the system and the 30 days only ‘started’ on the day they retrieved it. I was told that some companies are still waiting for invoices from January. This was not as reassuring as they tried to make it sound. It’s a vicious circle, which could all have been prevented if proper structures were in place to settle invoices when they are due, supporting smaller organisations from cash low to Cash Glow™.

To get Cash Glow, it is very important to plan and have processes in place so that everyone knows what is expected from them where, when and how. It is also important to stick to the agreed terms.

Personally, I hate having to follow-up on payments due, so I've had to find ways to avoid that awkward conversation to get our invoices paid on time. Here are my top ten tips:

• Invest in a really good accountant. Accounting is never creative;
• Ideally get payment before doing the work. A dynamic business owner that I have a high regard for, explained it really well: you need to pay for your groceries before you leave the store, you don't pay for the food only once you've eaten it. Why bill for your products and services any differently? 
• Create a Savings or Call Account and save the payments you receive in there and budget only for the expenses you have. Save the rest of the money for larger payments that you know will become due, in this way you won’t be tempted to use it for other expenses;
• For invoices that go out on a regular basis, or that don't get paid upfront; send them out early in the month. We want payment by the 25th of the month, so we send out invoices by the 16th. I have heard that some businesses send theirs out even earlier in the month. My experience has been that a week in advance is sufficient for most customers;
• In the past we only sent the first reminder for invoices the day before payment was due. However, we’ve started sending out the first reminder three days before the payment date including a reminder to the customer what was delivered, value added and the agreed upon terms;
• If we don't receive payment on the date agreed upon, the person working on the account then follows up with the customer. Fortunately, this happens very rarely;
• If payment is not received by the last day of the month, I get involved by making a phone call to the client to follow-up on the payment. Again, fortunately this is rarely necessary.
• With that said, late payments do get an interest fee added the next time the invoice goes out; it is communicated and agreed with customers on commencement of projects.  Banks and SARS don’t think twice about charging you interest or late payment penalties if you pay them late, why should doing business with corporates be any different? I see no reason why we should carry that cost;
• Sticking to the process is important so that everyone on our side and the clients' side knows what to expect and what to do;
• It is important to acknowledge the payment and to thank the customer once it has been received;

What tips do you have when it comes to invoicing and getting paid on time and managing your cash flow?

He that has money is bothered about it; and he that has none is bothered without it - unknown

*Because of the importance of cash flow, and we all need it to glow, I trademarked Cash Glow^TM.