For a small business, one of the most difficult tasks is to collect on receivables: invoices.  Small business owners work very hard on building a strong relationship with each customer.  Many even become personal friends with clients.  Therefore, it can become very difficult to collect money when it’s due, and it gets harder and and more uncomfortable with each over-due minute.   But cash is cash and is the life-blood of our businesses.  So what’s the solution?

My advice is to have a very aggressive, disciplined cash collections process, as such:

1. Get your invoices out on time.  In fact, I say get them out early.  I used to send invoices to builders even before we were finished with our work, knowing that they typically pay 45-60 days out.
2. Be firm on your invoice.  Make the due date clear and consistent.  If you need to be a bank and offer terms, then getting this invoice out on time (i.e. early) is even more important.  Be sure to include a little nudge, like “please remit payment immediately.”
3. Give them a small grace period after the due date, but once they hit that date, send them a ‘nasty-gram’ immediately.  Politely inform them that payment is past-due and that you expect payment in full immediately.  This letter can be gracious and firm.  And because it’s a letter, it is impersonal enough that it shouldn’t get in the way of your relationship.
4. If the customer still hasn’t paid, then it’s time for a phone call: “Hey [name], can I stop by and pick up that check?”  Friendly, but with a firm expectation of payment.

You can come up with your own formula.  The point is to have some firmness and some discipline.  That sends a message to your customers that you expect payment, and they will start to put you at the front of the line when they write checks.  This will also help you maintain that great relationship because there won’t be any hard or uncomfortable feelings that go along with a long-outstanding invoice.

Much of the advice I give is in keeping focused on your end game, what I call the Big Picture Goal (BPG). It’s this focus, I believe, that will keep you busy doing the right things, those things that lead you to business success. It’s classic ‘Begin with the end in mind” strategy a la Covey, Collins, and Kiyosaki. But what happens when you finally get there?

Here’s what:

1. Set a new Big Picture Goal. Maybe your BPG was to get to $1,000,000 in sales and you made it. Now, you might set a new BPG of $10,000,000 or a second location doing the $1M. Alternatively, your BPG might have been more short term in order to ensure survival, and now you’re ready to look even bigger!
2. Sell the Business. An admirable end for any business is to sell it and retire financially independent. If that is what you have in mind, then start researching how a business in your industry is valued (multiple of sales, multiple of profits, value of assets, etc.) Then, you can start planning for the Big Sale!
3. The Succession Plan. You might want to step aside and have a new leader manage your business. Just as Bill Gates stepped aside and allowed a ‘real’ CEO to run his company, you might want to set up a plan of succession for a manager/CEO to take over the day-to-day operations of the business. That new manager can SMS text you the good news while you’re fishing!
4. Close the Doors. Sometimes, the owner is the talent of a micro-business, a talent that just can’t be passed on or sold. If this is the case, then a plan of creating investment savings from profits might be the end game. Yo u still want to leave this with financial security. However, I would still recommend you look for ways to replicate yourself (licensing, website, write a book, etc.).

So, what’s your end game?

I saw a truck the other day that was wrapped bumper to bumper in bright yellow and red, for a painting company. It was quite a change from the typical paint-drip decorated white pickup with ladders you normally see a painter driving. What stuck out to me most was the marketing effort, again rarely seen in the painting business. It made me think that this business was a marketing business whose product is painting houses.

That led me to think about some past seminars I’ve given and blogs I’ve written about “What business are you in?” That question was answered in a short list of types of businesses, identified by the ‘need’ they fulfill for their customers. For example, the need for physical health can be met at a gym. This painter’s truck made me start to reconsider that angle. While I’m not ready to change my ideas completely, I am ready to start considering that we all need to be in one of three types of business:

1. I’m in the Customer Service Business! I’ve always said that Southwest Airlines is in the Customer Service Business. Their focus is on the passenger. I’ve even contended that if you were to take away their airplanes and give them, say, running shoes, they would continue on without a hitch, because they are in the customer service business and simply use their products to deliver that special experience. One of my favorite lines is, “We don’t want to tell YOU we have great customer service, we want YOU to tell OTHERS!” Know where that came from?

2. I’m in the Sales Business. Again, this business is not about the products, but is about building relationships with its customers. The focus is on creating a finely tuned sales machine that increases that top line each month and each year. When product is considered, it is designed with the sales process in mind. I might put Amazon.com in this category. They have built a great sales machine. They keep adding new products without a hitch because their sales system works so well.

3. I’m in the Marketing Business. Proctor and Gamble is in the marketing business. They know how to create products driven by their market, get it positioned right in front of them, and get the word out so that their customers flock to purchase thier products. They are not about the ‘best widget available!’ They are about marketing.

So, am I recommending that you become a Sales, Marketing or Customer Service Business? Yes! However, I’m not asking you to abandon your core strength, which is creating products that satisfy your customers’ needs. I’m simply recommending that you make one of the three methods central to your business. That way, you’ll get a steady flow of the customers you need.

Have you seen that inspirational video that’s going around? You know, the one about the difference between 211 degrees and 212 degrees of water. Just one degree is the difference between steam power and just water.

Here, take a look:

To get your business to the 212 degree boiling point, you must have many flames burning: marketing, sales, operations, cash flow, teamwork, goals, etc. There are two keys to being able to do this:

1. Keep that Big Picture view of your business. This is the temperature of the water, your company’s raison d’être, it’s ‘reason for being.’ Call it strategy, bird’s eye view, the view from 20,000 feet, whatever you want. The point is to know maintain this focus while working on all the small flames that will boil your water!
2. Manage all the flames (goals, plans and details) that will bring that water to its boiling point. Which flames are contributing to your boiling point? Which are not? Which need more fuel to burn, which can use less? As business owners, we have many flames burning, and we need them all to get that water to its boiling point.

To help you balance your flames and keep an eye on the big picture, I recommend a good plan. Sit down and map out your plan:

1. Strategy: Map out your strengths and weaknesses in your market as compared to your competitors
2. Cash Flows: forecast your sales, plan your monthly expenses; compare these to actual results each month and make adjustments
3. Marketing: Write out your promotional plan for the year and make sure you do it each month
4. Goals: identify your Big Picture Goal and figure our what its going to take to get your there (all the flames)
5. Metrics: find the numbers that will give you the pulse of your business: sales, profits, sales per transaction, etc.

Then, keep an eye on these plans every month. Pretty soon, your water will start to boil.

This is one of the most favored lines of an entrepreneur: “I work twelve hours a day!”, or “I work 80 hours a week!” I’m starting to wonder, “Do you really love what you do, or are you just bad at it?” I think as entrepreneurs, we are too creative and innovative to put up with working those kinds of hours.

Now, I know that if you’re a small business owner, you are probably putting in these long days. My point is not to insult you, but to get you thinking about a new way to exist. If you sat and took a good hard look at your day, would you realize that you could take just as many steps toward reaching your goals in much less time? How many hours could you cut out of your schedule each day or week?

I propose getting onto a Time-Loss Program (as opposed to the good old Weight Loss Program). Use these tips/ideas to help you get rid of waisted time:

1. What tasks can you delegate or outsource?
2. Where can you move from “perfect” to “good enough” in order to save time?
3. How could you better manage your calendar to save time in travel, meetings, and events?

Once you start thinking this way, you’ll be amazed at how much time you can get back: time to think big; time to explore; time for yourself.