Why is it that a firm will engage a client, start working on the project, wait for the client to send in missing information, finally finish the project 60 days later then at the end of the month send an invoice and be paid 30-60 days after that? A 120+ day process!!
It just doesn’t make sense. You have to pay the labour, the insurances, the rent and everything else in that time yet due to your management processes your client treats you like an interest free bank!
Remember this… “Thee who makes the rules – wins the game”
Why do you operate under this model? Just because you always have is not a good enough reason.
If you ask for some money upfront (and make new rules) many of your clients will pay. If you ask for 100% upfront before starting many of your clients will pay. If you give your clients some choices (and not the pay in arrears choice) many of your clients will pay.
Your monthly receivables balance should be less than 6% of annual fees – or 20 days of annual revenue.
Stop being an interest free bank. Today!
I have written an extensive report on Accounting firm performance. You can download the full report here.
Enjoy video # 7.