Who Should Be Paid And When? (Lesson 13)
A very common issue for many of the auto workshop owners we talk to revolves around cash flow and how difficult it can be to maintain it within the business. It is stressful for business owners and managers and more often than not they express to us high levels of confusion and worry about cash flow.
Your cash flow is an easy problem to solve and you may have more money available in your business than you realise. Many auto workshop businesses explain to us that they pay their outstanding invoices either immediately or, worse still, haphazardly. This is often the cause of a cash flow shortage.
A simple system and a little organisation will free up your cash flow, eliminate any late payment penalties and take the worry out of your mind.
There is a way to pay your invoices without limiting your cash flow. When the invoices pile up you may feel that once again, you are trying to fill that leaky bucket that we mentioned earlier. You are busy, you are working hard, your staff are working hard, yet there is a constant cash shortage. Why is this happening? Why does the bucket continue leaking?
The story below shows just how easy this problem can be for you to solve in your auto workshop.
Jim had run his shop for five years, and he had run it very well with what he had. His workshop was busy, he worked hard, he paid his accounts and his customers were reliable with their payments.
He was, however, always struggling with cash flow. Because Jim was always busy he liked to pay each creditor as the account came in. He felt that this was the best way to make sure he didn’t forget to pay someone, plus it seemed the ‘noble’ thing to do. At a glance this seems like a sensible approach. However, for Jim, paying his accounts in this way was actually causing him trouble. Making these immediate payments was the source of his cash flow problem.
With an automated system Jim was able to pay accounts on time, and still have a healthy cash flow. He achieved this with a few phone calls to arrange new payment dates with creditors and an automated payment system that kept everything up to date. The only difference was that now his payments were made at the times when he had more money.
Not only did he now have cash flow, he had more time. He was no longer writing cheques and wading through paperwork amid the constant worry that he had misplaced an invoice or forgotten to pay someone.
Jim also had a healthier mindset and a happier outlook. His stress about money washed away, all of Jim’s payments were made like clockwork. It took Jim just a few hours to set up his new payment system and he hasn’t looked back since.
Jim didn’t just take care of his creditors with an automated system. He also organized his debtors. With one glance he could see who owed him money, how much they owed, when the payments were due, which payments were overdue and by how long.
His system also sent out late payment notices automatically and this simple change in his business actually lifted a heavy burden. Jim’s auto workshop is well known, and he knows many of his customers very well. He had always struggled to chase late payments because most of the people who owed him money were also his friends.
This made the conversation awkward. He was a mechanic, not a debt collector, and he didn’t like talking to his friends about money. With his new system things are different, now when his clients receive a reminder, he is able to joke with them about it. “It’s just my new system mate – that stuff goes out automatically, I feel like I have another wife it’s so organised”.
He was able to have a laugh, but privately he knew they would remember to pay him.
A system that takes away burdens is invaluable and Jim knows that by chasing his money for him, his system is raking in money owed that he may have never been able to get.
Do you struggle to chase down money your clients owe you, or struggle with cash flow problems?
To your success,
Australia’s #1 Automotive Business Growth Expert