If you accept payments from your customers on a time-based plan, are you keeping track of who owes you what? Really keeping track of it? If the answer is “Yes” – EXCELLENT! If the answer is “No” – you may have a leaky bucket and we need to put some duct tape to work.
First. What’s a payment plan? Let’s say you sell a product or service for $10,000 if someone pays you all at once; but give customers an option to pay you $2,000 a month for six months instead of that one-time price. This isn’t a typical month-to-month membership type payment plan, but a service you’re offering, or a product you are selling but allowing your customer to pay you over a period of time instead of all at once.
Sometimes in our entrepreneurial world, this is an important offer to be able to make, since large chunks of cash aren’t always available in our customers’ pockets. And this is an awesome thing to be able to offer. In total (if you follow the example above) it brings in more money to you (in exchange for the risk of waiting for it). But, the flip side is … there IS a risk in waiting for it!
The trick is to minimize that risk while maximizing the cash by making sure that you don’t lose track of when that cash is supposed to get to you; and whether that cash is actually getting to you.
There are many ways, some intentional, and some unintentional that those payments could stop coming. Customer credit cards hit expiration dates, get canceled and reissued because of fraud, or get canceled altogether. Clients also manage to test out many other options that either accidentally, on purpose cause you to stop getting your cash.
So as the business owner: your job is to watch-dog them. Aggressively!
Cash is King – always remember! Some even say that “Until you get the cash; you haven’t really completed the sale.” (Salespeople HATE that phrase; but Your First CFO loves it.)
Now, the good news – this isn’t so hard if you have just a few customers, but as your business grows, I really recommend that you get a solid system in place to help you keep track of it.