Payment terms and cash collection systems in small business

Payment Terms Cash Collection

Payment Terms Cash Collection

Make your slow-payers an offer they can’t refuse

I have a very good friend who has a small business that relies on his expertise. Clients come to him to resolve very specific and very complicated challenges. The people my friend works with are artists, promoters, designers, producers. The art world in other words

My very good friend is a bit of an artist himself, to be honest. But he’s also an absolute expert in his field. As a matter of fact there are few, very few, people with his level of expertise anywhere in the world.

So clients come to him when they want the best help in the world, when they want their project to win the big international prizes and when they want every single little detail seen to perfectly.

Given it’s a small niche that my friend operates in, a tiny one in fact, I’ve been surprised to see over the years how well my friend has done for himself.

But he continues to have cashflow struggles, every year again.

I found out why, the other day.

Being the last one to get paid

My friend doesn’t have payment terms or a collections system. And consequently, some of the people in the art world who are his clients, use him like a doormat. Time and again. Every year some of his clients think it’s ok to pay him last, after everyone else has been paid. Sometimes he doesn’t even get paid at all.

My friend doesn’t like systems. He doesn’t like bureaucracy and he doesn’t like policies. And he especially doesn’t like implementing systems to do with money. He operates in the art world and in the art world, money is treated as a necessary evil at best and as the devil’s spawn at all other times.

I get it. The people who engage him may be at the top of their game, but most of them don’t make enough money to pay the rent. They’re struggling artists. And my friend empathises with them and more importantly, he believes that part of what his business is on this earth for, is to facilitate the presentation of important art to the world.

Cash is the food in your business

That’s his Purpose, and as those of you who’ve read some of my musings in the past know, the Purpose of business isn’t about making money. I like to quote John Mackey, the founder of the multibillion dollar company “Whole Foods Markets” in the USA. John Mackey says that money is like food for a company. The food it needs to live and fulfil on its great Purpose on this earth.

Without food, adequate nutritious food, the company cannot fulfil on its Purpose.

My friend’s business must make money, cash, so that he can present the important artwork he’s involved with to the world in the best possible light, and so that his company can continue to do so for many years to come.

In our society, there simply is no other way.

And that means, my friend must put in place payment terms and collections systems and stick to them.

Sample payment terms

It’s a simple matter of adding a couple of standard conditions about payment to each proposal and each contract such as:

  • 50% of each contract is paid up front.
  • 35% is paid before delivery of the work.
  • 15% is paid within 7 days of completion.

These are normal commercial terms. The promoters and producers and designers will recognise them for what they are, because if they are professionals themselves, they most likely have similar terms in place in their own contracts.

Once implemented, my friend needs to stick to those terms religiously and run a collections system as well.

A simple collections system

A collections system can be very simple, in the above example of 7 days payment terms, it could look something like this:

  • On day 8, a friendly reminder email goes out, asking if the invoice has been received and attaching another copy of the invoice. (Use a standard scripted email template)
  • On day 15, a phone call is made and a commitment is asked to a date by which the payment will be made in full. (Simple script for the phone call, so you avoid the awkwardness)
  • The day after the date the client agreed on, if the payment has not been made, a final demand is sent by email, with a date by which the payment is to be made and stating that: If payment is not made by that date, the debt will be forwarded to a collections agency, and that any collections costs will automatically be added to the outstanding amount. (Another standard scripted email template)
  • On this final date, the owner makes a phone call and a last email is sent (more scripts), warning that the debt is about to be passed to the collections agent. Email and phone call will remind the client that collection costs will be added to the debt.
  • The next day, the debt is forwarded to the collections agent. The client is advised that this has happened and that any collection costs will now be added to the debt. The business owner ceases to let it bother him or her, because it’s now dealt with by someone else.

This sounds like a harsh and inflexible system.

And it is, or rather it’s professional and clear.

Those people are liars

Payment Terms Cash Collection It needs to be. When people don’t pay, and they are given significant extra time to pay and they make promises to pay, but they don’t, they are liars and they have your money in their pocket.

My friend doesn’t like to implement a simple system such as this, because he thinks the artists won’t respect him in the morning and he (like all of us) really wants to be respected in the morning.

I told my friend three things:

  • If you implement a system such as this and you run it religiously, without fear or favour, you will be seen as a professional. In fact this is the most effective way to gain respect.
  • Who wants to be respected by people who are liars, who can’t organise their lives like adults and who think it’s ok to treat a person like you as a doormat?
  • Payment terms and collections systems, run consistently, work. They generally, at least, halve the number of issues businesses have with slow paying clients.

Implementing a payment and collection system and running it, religiously, means you’ll be treated as a respected business owner, not a doormat… I promise you.

FREE eBook: The 10 Truths for Raising a Healthy, Bouncy, Business

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The Ten Things You Must Do To Make Your Business Value Go Up

Guest Post by John Warrilow from Visme

Focus on these 10 things, if you want to sell your business Like A Boss

Owning your business is tough. You need to work hard and work smart constantly. If you’re aiming to make your business stand out both in the eyes of your target and industry peers, John Warrillow and Visme bring us this simple infographic of the 10 secrets of making your business – whether big or small  – more attractive to buyers for greater value no matter what industry you are in.

top 10 things to make your business more valuable

The Opposite of Overwhelm and How to Get There

overwhelm in business

How motorbikes and potholes make business fun

Most small business owners are overwhelmed on a day to day basis. They’re drowning in the daily demands of their business and they don’t get to the important stuff. Their families, health and social lives suffer, and even though they’re running around all day looking after the needs of their business, the business seems stuck, spinning it’s wheels.

This is not news.

Tell us something we didn’t know”, I hear all of you say. You’ve probably experienced this state of overwhelm for many of the days you’ve run your business and it’s certainly not the first time I’ve spoken about it either.

But what’s the way out?

Potholes and Motorbikes

I remember when learning to ride a motorbike, the instructor taught us how to avoid an obstacle on the road, a pothole for example. He said:

“Where you direct your gaze on a motorcycle is where the bike will automatically want to follow. When spotting a pothole, focus on where you want to go instead if you want to avoid breaking your fork.”

It’s a good analogy. I find that by focusing on how we want to reduce our Overwhelm, we often end up magnifying the pothole.

The trick is to focus on the opposite of Overwhelm

I refer to the opposite of Overwhelm as “Fun”, “Fun in Business” to be precise, because Fun and Overwhelm cannot exist side by side. When you’re having Fun you’re not Overwhelmed and when you’re Overwhelmed you’re not having Fun.


Of course you’re very welcome to use a different word than overwhelm, some people think about the concept of Flow, others talk about being fully engaged or you can call it buzzing if you prefer. What matters is that we put a clear picture in our minds of what we want life to be like, rather than focusing on what we don’t want anymore.

overwhelm in business So let’s do a little exercise. I’d like you to get out a piece of paper and pen and draw a horizontal line across the page and mark the line 0 at the left end and 10 at the right end.

I’m calling this line your “Fun in Business” scale, but if you’d rather call it the “I’m buzzing scale” that’s fine too.

Write today’s date beside the scale.

You’re buzzing

This is how we define the scale, 10 on the scale means that the week just past in your business has been as much fun as you can imagine. It’s been a buzz, you’ve been paid well, you’ve done great work, you’ve delivered on your deadlines, your staff are engaged and do great work and are efficient and making money for you, you’re customers love you and they’ve told you so, you’ve been able to get home at normal times and have had energy to give attention to your spouse and kids (if you have them), orders are looking good for the immediate future, you’ve met some important challenges, you feel creative, resourceful and in control of life.

That’s a 10 on the scale.

0 is the opposite of all of that.

Now, I want you to think about the following questions:

  • What number on would you give the past week in your business, on your Fun in Business Scale? Go ahead and mark that number on the scale.
  • Now that you’ve picked a number, ask yourself, and ideally write down, why you picked that number and NOT a lower number, in other words, what have you achieved already, to get yourself to that number on the scale. Important note: with all your might, resist the temptation to focus on why you are not at a higher number.
  • Now ask yourself: If I were to ask myself the same question next week at the same time, what number would I want to be on the scale then? Say you were a 4.7 this past week… Maybe you can get to a 5? Or a 4.8? Mark the number on the scale.
  • Last question: Having decided that you want next week to be a 5.3 for example, on the Fun in Business scale, what specific things must you do this week? What specific tasks, actions can you commit to, to get your week from 4.7 to 5.3? (I generally suggest to pick a maximum of three things and each of these things should take a maximum of 1 hr each to do)

A little less overwhelm, a little more Fun next week

And now comes the fun part. If you’ve gone through the little exercise above with me, you will have selected 1, 2 or 3 things to make happen in the week ahead and if you do these things, your week will have been a little more Fun than the immediate past week has been.

Of course that’s all well and good, but you’ve still got to find time for those three things and actually do them.

So, grab your diary, right now and block out time for those three things this coming week. I’ll run through a little example to illustrate the process:

Let’s say one of those actions of yours might be around planning your days better. So maybe an action might be to get up ten minutes earlier every day and before you pick up your phone or go to your email you think about the day ahead… The Big Rocks… What are the big things you need to get done today, and when can you realistically expect to be able to do them?

Such a ten-minute planning moment, before the craziness of the day gets under way, will in most cases improve your feeling of being in control throughout the day and hence increase your sense of Fun in Business. (Make sure you leave plenty of space to allow for the inevitable unforeseens and crises… Just plonk the big rocks in the diary… The rest will slot in around those)

New habits

Of course, your actions this coming week might be around entirely different aspects of business and life. Using the scaling approach is a really simple and effective method to help you focus on the preferred future rather than on the past you don’t want anymore. It will help you get into the habit of looking ahead and concentrating on what’s in your control, and to take small specific actions moving forward.

Don’t make the mistake of wanting to do everything at once. Taking one specific small action every week is much more sustainable than trying to take an enormous great big step. Big steps lead to big falls. People that take consistent small steps end up changing their lives … I promise you.

FREE eBook: The 10 Truths for Making Business Fun

The Ten Truths for Making Business Fun  

Staff can make or break your business

employee from hell

employee from hell staff zomby

Sometimes even good people have to be sacked

The March 2017 theme of the business thoughts newsletter is about staff, how to engage them and how to get the most out of them.

Staff management is one of the toughest topics for me to write about, because it was undoubtedly the area of business I found most confronting in my 20-odd years as an employer. Still, now, I am regularly challenged when managing various admin and marketing assistants in my coaching practice and I feel most unsure of myself when supporting my clients around their staff issues.

Managing people is always going to be the toughest thing you do in your small business, and, at the same time, in nearly all cases, it also offers the greatest opportunities to make money and make Business Fun.

In other words, there’s nothing more important than to get good at managing your people.

I’m going to illustrate how challenging it can be to be a great employer with a story about one of my favourite clients:

Employing a GM so you can step aside

Laura owns a design consultancy in Sydney in a specialised niche market. The business has functioned exceedingly well for over 10 years and is highly profitable and Laura is in the process of extracting herself from the day to day running of the business to allow her to focus more on her family and on a number of other interests. To be able to do so Laura promoted her chief designer Amanda to general manager of the business 2.5 years ago.

Amanda is a highly skilled designer, a good person, committed to the continued development of the business and to Laura personally. Laura and Amanda have enormous respect for each other. The perfect person to take on the GM role.

But it’s not working.

Slowly but surely the relationship between Amanda and Laura has soured over the past 2 years. Laura is entertaining the possibility that she and Amanda may have to part company. Amanda in her turn recently mentioned to Laura that she is considering her future with the company.

Amanda has for one reason or another never been able to get on top of the GM role and the business has suffered as a result.

Everyone is unhappy

Both of them are very unhappy and from my conversations with Laura I know her confidence has suffered. She’s feeling frustrated at the prospect of losing her best designer, and a friend, and that she may have to step back into the business full time again.

I think the unhappy story illustrates a few of the biggest challenges in managing staff in small business:

  • Small business owners find it very difficult to step away from the business. They’re generally deeply invested in it, not unlike parents are in their children. It’s really hard to let your kids go off and do their own thing when they get to adulthood. It’s also very hard for Laura to let her business become independent.
  • The old “Peter Principle”: People are promoted to one level above their ability. Just because Amanda is a great designer, doesn’t mean she has what it takes to be a great GM.
  • Employing people, managing people, takes skill and experience. There are good reasons that larger organisations employ specialist HR staff to do a lot of the people management stuff. Creating roles and responsibilities documents, negotiating employee conditions, managing deliverables and accountabilities, coaching staff to get the best out of them. It all takes skill, experience and time. Laura’s training in design and consulting included none of those disciplines.

Having our time over

Two and a half years on from putting Amanda in the GM role, Laura has learnt from the many mistakes she’s made. If she were to have her time with Amanda over, I have no doubt the experience would be a very different one for both of them. But we can’t have our time over, all we can do is apply our learnings to the future.

Laura’s predicament is a common one. It’s certainly not the first time I’ve been involved in such a situation with my clients in the past 12 years of coaching small business owners.

There’s a question I often ask my clients when in the midst of these employee challenges:

“In your heart of hearts, deep deep down, if you were given the best possible advice and you were to carry out that advice to the letter, do you think it’s possible for you to remedy this situation with your staff member and turn him or her into the engaged, highly functioning team member you need?”

In some cases the answer is: Yes, I think it’s possible to do so for me. And if that’s the answer, I help my clients find the way and encourage them to give it everything they can to turn the situation around and more often than not, there’s a successful outcome.

It’s too far gone

But sometimes, the answer to that question is: No, I doubt it, the situation is too far gone at this stage and I can’t see myself turning the ship around, no matter how hard I try.

In that case, there’s only one thing to do and that’s take steps to have the staff member move on, before things get uglier, as they undoubtedly will.

Laura doesn’t believe she can fix it anymore and we’ve started talking about how to end the relationship. Laura is absolutely committed to be as respectful and considerate of Amanda as possible and she wants to give her every opportunity to find a great new job where she can shine and be happy. She’s going to give her long notice (as long as 6 months) and support her in finding a new role in any way she can.

But Amanda will be fired by Laura.

Once it’s clear that in all likelihood the situation is not going to be remedied whatever you do, the most responsible thing you as the business owner and employer can do is to grasp the nettle and deal with the pain, calmly, clearly and respectfully. Avoiding the issue, putting it off, dragging it out is not in the best interest of yourself, or your business, and especially not in the best interest of the employee in question. Keeping people on just because you feel bad and you want to avoid confrontation and nastiness is truly the most disrespectful thing you can do to any employee… I promise you.

For more information about to how to step out of overwhelm, get unstuck and start having Fun in Business again, click here

For more resources, and reading on strategies for growing your business follow this link to the first of The 7 Big Questions that all small business owners want answered

FREE eBook: The 10 Truths for Making Your Business Grow

Small Business  

Competition, Growth and the Red Queen

competition and growth

competition and growth

We must all become believers at the Church of Gross Profit

Tracey launched her business about 4 years ago, and in that time she’s built something quite special. Tracey’s business sells a unique home delivered fresh food solution online for busy professionals who want to have a healthy balanced diet that tastes great as well.

Tracey’s business model is in fact so successful that it attracted not only growth but competition. Entrants copy what she’s been doing so well for the past 4 years. Some of those competitors are trying to compete on price, some are offering delivery to different areas of Sydney and others are offering different payment models.

Tracey is annoyed, she’s worried and she’s determined. Annoyed that others are stealing her ideas, worried that they’ll kidnap her customers and determined to fight the bastards. Good for her, and I’m going to fight right alongside with her and teach those upstarts a lesson they’ll never forget.

Good news and Bad news

As always, there’s good news and bad news: The bad news is that it seems that some of these bastards have actually gained a foothold in Tracey’s market, but the good news is twofold:

  • The bastards are demonstrating that there is room in the market. It’s clear that there are a lot more people who want what Tracey has to offer than she might have thought.
  • The bastards are testing some new ideas that Tracey herself has been considering for a while, but now those ideas are being tested free of charge or risk to Tracey’s business.

Tracey’s knee-jerk temptation is to attack. And the obvious attacking strategy is to meet the competitors head on and offer the same things they do. One of those things revolves around delivery options. Tracey’s products are delivered for a flat fee, by courier, on the day of ordering to a limited number of areas of Sydney. It has always been a core principle of Tracey’s, to keep the whole thing super simple. A flat delivery fee fits that principle. The flat rate means the delivery has to be restricted to certain areas of Sydney, or Tracey can’t maintain her minimum margins.

Same day delivery everywhere

But one of the new upstarts is offering same day delivery everywhere in Sydney and Tracey feels she needs to match the competition — that flexibility.

But I’ve advised her against doing so, for one reason and one reason only:

Buying growth always leads to disaster.

Sure, it would be nice to move into the untapped regions of Sydney, but Tracey would only be able to do so by paying a lot more for her deliveries. She’s costed the various options and her delivery costs to those new areas will increase by about $2 per item. $2 Doesn’t seem like much when the average price per meal delivered is roughly $30. But, the fact is that her current Gross Profit Margin (profit per meal) would reduce by 33%. At the moment, she makes about $6 gross profit per meal. With an increase in courier cost of $2 per meal, she would suddenly only make $4 per meal delivered. Doing that spells disaster, as sure as God made little apples.

Not long ago we updated our breakeven calculations for the business and we worked out that at a certain level of sales, the Gross Margin on each item sold had to be at least $5 to be able to break even. At a Gross Margin of $4 per item, Tracey would need to sell 25% more meals just to break even.

The Red Queen never stops running

It’s what someone recently referred to as The Red Queen Problem.

The Red Queen being one of the Queens in Alice in Wonderland who says:

“My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere you must run twice as fast as that.”

In effect what Tracey would be doing by delivering to new areas at the cost of her minimum Gross Margin is running harder, but standing still. No doubt Tracey would be selling more meals if she offered same day delivery to other areas, but in all likelihood, she’d make less money than she is now, she might even lose money. The profitable areas of her business would be subsidising the unprofitable areas and if there was ever an unsustainable way to grow a business, that’s it.

Growth is irrelevant. I’m not sure who ever made growth such a focus in business, but he (and it’s guaranteed to be a he, btw) should have been strangled at birth. The blind focus on growth that we are told to chase in business is crazy. Successful business owners, business owners that build Great Small Business that are Fun and that stand the test of time are devoted believers at the Church of Gross Margin.

I have no doubt that Tracey’s business will be a Great Small business that stands the test of time. Building Tracey’s business model is much more complicated than it looks and consistently making money in this business is a tough  challenge. I’m sure that some of those new bastards are not making money at the moment and that they’ll fall over soon enough. One or two of them might get established and survive, but it’s clear the market is big enough and they’re going to be driving Tracey to innovate and come up with new solutions and new approaches to doing things and that’s healthy.

But buying customers at the expense of Gross Margin, that’s a disaster… I promise you.

For more resources, and reading on strategies for growing your business follow this link to the first of The 7 Big Questions that all small business owners want answered

FREE eBook: The 10 Truths for Making Your Business Grow

Small Business  


Build your business with Snapchat

snapchat seniors business

Guest post by Senior Advisers Network

Get with the times… Snapchat can do wonders for your business

snapchat seniors business

Get with the times, SnapChat can do wonders for your business

The latest social media trend report by Sensis highlights that 99% of Australians have an Internet-enabled device and as many as 87% are online every day. Social networking is one of the most popular activities for Australians aged 9 and above, with almost half of the country being active on social media on a daily basis. Looking at these stats, it is impossible to ignore the potential reach that social media has for small businesses in Australia. Here we take a look at one of the rising stars in social media – Snapchat!

Millennial Favourite

Wait, what? Snapchat is that thing the kids use, right? To send the pictures that disappear in a few seconds. That’s not a business app. Or is it?

Snapchat may not be the first social media app you consider when you think of business, but Social Media News recently reported that around 2 million Australians are active on Snapchat every month, so it would certainly be beneficial to find a way to put this platform to work for you.

How Snapchat Works

Understanding how it works is the first step.

Snapchat works with the camera app on your phone to send pictures that you take to people you are friends with on the app. When you receive a snap, you can view it for up to 10 seconds before it disappears. If you want, you can take a screenshot of it or view it once again, but after your 10 seconds are up, it’s gone from the app.

You can also put pictures in a snap story, which is visible for 24 hours. The idea is to give a ‘snapshot’ of your day or an event that your friends can look at.

Engage with Your Customers

When trying to engage with potential and existing customers, the first thing to do is to reach out and make friends on Snapchat. You can add friends if you have their snap code, or if they are nearby. You’ll want to add your customers and your followers from other platforms to your Snapchat friends list.

As you can see, Snapchat is a little different from other social media apps, so you might need to think a little bit about how to best use it to promote your business. Snapchat is predominantly used by a millennial audience, but seniors who are in business can benefit too, particularly if they are attempting to promote their services and products to a younger generation of customers.

Here are some ideas:

  • Use it to promote live events. If you’re having a grand opening or a special promotional event at your retail store, you can announce it on Snapchat. Then, when the event happens, you can add live video to your snap story so that even customers who can’t be there can see what’s going on.
  • Have a contest. Snapchat is particularly suited to contests like scavenger hunts. Have a list of items in your store that customers need to snap, and offer a prize for everybody who finds them all.
  • Give a tour. If your business includes manufacturing or production, give a tour of your facility on Snapchat. Customers will be able to see just how the products they buy are made.

These are just a few ways you can promote your business using Snapchat. As you start to use it, you’ll probably come up with more.

For more resources, and reading on strategies for growing your business follow this link to the first of The 7 Big Questions that all small business owners want answered

How To Find a Great Business Coach

how to find a business coach

how to find a business coach

The three questions to ask yourself if you’re looking for a Business and Life coach

A famous university in Switzerland did a research project in the eighties to find out once and for all which of the many forms of psychological coaching, counselling and therapy methods was the most effective.

Solution Focused therapy (which is coaching), Cognitive Behaviour Therapy, Person centred therapy, Freudian, Jungian, Existential… All of them where investigated with a range of test subjects.

The outcome turned the world of therapy, counselling and coaching on it’s head.

It turned out that only a very small part of the effectiveness of a therapy engagement was related to the form of that therapy. The top three factors that influenced the outcome of therapy were:

  • The quality of the relationship between the client and the therapist
  • The length of the engagement
  • The readiness of the client to make changes

In other words, which of the various form of therapy was chosen by a client had very little to do with the outcome of therapy.

Clients who move mountains

Great coaching, business coaching, life coaching, executive coaching, is just like that. The outcome is first of all dependent on those same three factors. Right at this moment I’m working with about 10 clients. Many of those clients are moving mountains in their businesses and their lives every week. A few months into my engagement with my client Clare, she sent me an email this morning that included this sentence: “So much of my business and my life has changed in the past months, in ways that no one could’ve planned, that I find it hard to sit still”. But one of my other clients, Adrian, remains stuck more or less where he was when we started. In our session yesterday, I felt I had to point out to Adrian that something needs to change or he’ll end up disappointed in our work and his own achievements.

I am the same coach, with the same skills and experience for both of these clients, but with Clare the coaching is working and with Adrian it isn’t, at least not yet. I’m still fairly confident that Adrian will come round in the coming months and I’m hoping that my strong words to him yesterday, will have the desired effect, but it’s possible that my words fell on deaf ears and that the coaching engagement won’t have the desired outcomes for him.

The truth about how to find the best business coach

In the 12 or so years that I have been a business – life coach, I’ve learned the truth of the Swiss research project. When my engagements work, they do so because we get those three factors right and when they don’t the problem always hides in the same place.

I’ve taken this lesson to heart over the years and I’ve designed my coaching programs and my intake processes for new clients with those three factors in mind. But you need to take your own responsibility to check in on these three factors as well.

Three questions:

Ask yourself three questions:

  • Am I prepared to change? (Business change without personal change is impossible)
  • Am I prepared to give the coaching process adequate time to work? (Real change takes time)
  • Do I believe that I can build the kind of high trust relationship with this coach in which I will feel safe enough to step out of my comfort zone and stay there? (Real change always happens outside your comfortzone)

Unless you can answer those three questions with a wholehearted yes, save your money and wait until you can.

Working with a great business coach in a great coaching engagement can be one of the most life changing and rewarding things you’ll do in your career as a small business owner… As long as you take the trouble to get it right… I promise you.

More about the various forms of coaching, business support and guidance here

#FindingACoach #SmallBusinessCoach #SmallBusinessDevelopment

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