So, you want to launch a small business or reposition your company as a managed service provider (MSP). What steps can you take to maximize your chances for success? I've written a four-part blog to cover that very question. Tune in each day this week for the next chapter. Here's part 3: Cash flow.
I was speaking with another entrepreneur -- a lawyer -- last week, and asked him what single piece of advice he'd give to people who are preparing to launch a business. He said the number one priority has to be managing cash flow.
Even if you complete a successful project, do great work and win respect from customers, any project with unpaid invoices has to be considered a failure, he noted. Lining up managed services contracts isn't enough. You need a tireless person to chase payment on outstanding invoices.
The entrepreneur's advice:
- Have a point person in your company who chases payments from customers. Don't delegate this responsibility to multiple people. That way, a single person will have a complete view of the situation.
- All of your contracts and invoices should clearly articulate when payment is due (upon receipt, net 30 days, etc.).
- Include a potential penalty (interest fees, etc.) in bold letters on your invoices, articulating that late payments will actually trigger increased charges.
- Your CRM and accounting systems should be automated to trigger reminders when payments are overdue. Follow-up with both and email and a phone call to the client.
- Ongoing communications should recap all previous communications, including specific dates and details ("We spoke with your CFO on June 1, 7 and 15 about this. He assured us immediate payment but it has still has not been received.")
- Escalate communications and go right to the top (your customer's CEO) if department managers, directors and other contacts are unresponsive to your requests.