What happens when you have reached the end of the VAT quarter – you have had a really good month of sales but you have reinvested the cash generated in the business or drawn it out to pay your wages! You realise that you probably won’t have enough cash to pay your VAT liabilities in 5 weeks time. Opps! This is a story we hear all too often.
So what do you do if you don’t have enough cash available to pay your VAT?
Well, hopefully, you will know a bit earlier than the day before the VAT is due but I’m setting the scene as I spent some time recently with someone facing that exact problem. We had to put a quick cash generation plan in place to be able to make that VAT payment.
Here are six tips that you can implement now to help improve your short-term cashflow before your next VAT payment is due.
1. Check your receivables
The quickest and easiest way to get the cash you need for tomorrow has to be collecting it from clients who already owe it to you today. Email them, call them or visit them if you are passing. A polite and personal request for payment of an outstanding debt is hard to ignore. Be candid if you must, you have a big VAT bill to pay. Help them understand the urgency. One day you may be in a position to repay the favour.
2. Make it easy for people to pay you
Make sure your bank details, Paypal account, Stripe details (Credit card facility – if you don’t have one, set one up) are clear and visible on your invoices, statements and email reminders. Persistent polite reminders work.
Stripe allows you to collect payment by debit or credit card, and you can download an App to turn your phone or tablet into a virtual terminal. You pay for the services as you use it without any monthly fees.
Collect payment upfront of you can, especially for extras or add-on services – see 4) Setting up an online shop.
How about setting up a Direct Debit facility? Anyone can have a Direct Debit now with GoGardless and Directli. If customers buy regularly – make it part of your T’s and C’s to pay by DD and collect on 7 days. My IT guy invoices me monthly for my phones and intermittently for adhoc work and collects everything by Direct Debit. Super efficient for both of us. Never chase a payment again.
3. Shorten your payment terms
7 days is plenty for a service. Payment upfront works well for products so long as you have a brilliant returns policy – see Amazon! Would you ask Tesco for credit before walking out of the door with a bag of groceries? No, I thought not! You may get credit with a credit card, but there is a cost for that if you don’t pay the debt off by the due date.
4. Make it easy for people to buy from you with an online shop
How many services do you give away for free? How many times does a client go for the up-buy (Can you just…Would you mind…”) without you going for the up-sell (Sure, let me send you a quote for that…..)!! I know, I do it all the time and before you know it, a 5-minute job takes 3 hours out of your day and you didn’t charge for it! So make it simple… create an online shop that you can direct people to – so that they may buy that little snippet of your time. Or pay for that upsell in advance. Given the opportunity, people will often make an impulse buy when they stop by your shop to save them the time and bother of coming back another day. Next time they ask if you could just…..you can say “Sure, let me send you the link for that”.
Here is an example of our shop. The SOS products work particularly well for clients who need a job done to remain compliant with Companies House or HMRC, but who might be behind on their monthly fixed fees.
- See – Caseron’s Shop
5. Offer a premium product for a premium price
Think Alton Towers who allow you to pay a premium queue jumper price. Out of hours appointments could be charged at a premium price. Or guaranteeing a job will be finished same day might be another option for others.
6.Engage clients with an irresistible ‘buy-now’ deal
Do you have an online service, a new product, a special offer or an afternoon free that you can sell for some bespoke 1-2-1 consultancy? Perhaps you have a new service that you want to try out and you need to beta test it. Do you have some slow stock sitting on a shelf that you need to get rid of? Think Black Friday sale – what do you have, that your customers might want to buy and you can generate a sense of urgency or scarcity around. You can email your customer, your mailing list or send out an offer to your Facebook Group (if you have one) and capture opportunity sales that might be open to you.
If you have any other suggestions – please feel free to comment below. We would love to hear what you do.
