Saturday, May 18, 2024

Mastering Payment Expectations: Strategies for Smooth Transactions

Now, onto the House Chronicles. This morning, I signed all the final documents at the bank for my military surplus home purchase. And guess what? The bank's appraisal came in at $104,000, while I'm only paying $83,000 for the house. Watch the video here:

That's a tidy $21,000 in equity right off the bat. And with the neighborhood stabilization thanks to new purchases, the value is likely to climb even higher. It just goes to show the power of patience and perseverance in real estate.

But onto the main topic for today: setting payment expectations with customers. It's a crucial aspect of running any business, yet many struggle with it. Take, for example, a company I've been advising that primarily serves contractors. For years, they've been sending out invoices with vague payment terms like "due upon receipt," leading to an average wait time of 40 days for their money.

Since I've been working with them, we've revamped their invoicing strategy. Now, their invoices clearly state a due date within 30 days, with a 2% penalty thereafter. This sets a firm expectation in the customer's mind about when payment is expected. But that's not all—you can also incentivize early payment. Offering discounts for prompt payment or encouraging credit card payments can speed up your cash flow.

For businesses dealing with large corporations, consider accepting electronic fund transfers (EFTs). Not only does this streamline the payment process, but it also eliminates delays associated with checks.

Another tactic is to set a payment policy. Whether it's a minimum threshold for checks or a strict "no accounts under $X" rule, establishing clear guidelines can help manage expectations and reduce outstanding receivables.

By implementing these strategies, you can shorten your days sales outstanding (DSO) and improve your cash flow. And if you want to dive deeper into cash flow management, check out my book "Credit Card Advantage," which is packed with tips on leveraging credit cards to optimize your finances.

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David C Barnett

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