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13 ways to collect cash faster in your business

cash management collections Jan 04, 2023

They say cash is king, but too many fail to collect it in a timely manner.

What gives?

I say it's a little bit of fear, a little bit of lack of knowledge.

Today, I set out to bring you the knowledge and maybe address a few fears.

14 ways to collect what you're owed faster.

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13 ways to collect cash faster in your business

Cash is the fuel of business.

When doing a survey of failed businesses, CB Insights found that 38% of businesses failed because the ran out of cash.

Despite this, a lot of businesses don’t have good processes for collecting the cash they’re owed.

So, what are the best ways to collect cash faster?

Here are 13 ways you can collect cash faster.

Vet your customers

Some customers are perpetually late. But, without a prior relationship, this can be hard to know.

There are a few things that can help, but aren’t foolproof:

  • ask for references

  • check D&B (google it)

  • get their legal documents

If you have trouble with any of these, it’s the first sign they’ll struggle to pay.

Then, once working with them, be cautious early in the relationship. If they struggle to pay early, shorten the leash.

Have documented terms

With the fast-moving nature of business, it’s easy to move forward and just “do the work.” But, when the formalities aren’t taken care of, it opens both parties up to risk.

Where it gets complicated is when you have a pattern of not getting the proper paperwork.

Even just documentation and acknowledgment of payment terms, without a contract, will save you headaches later.

Bill quickly & accurately

Every day you wait to bill after the work is complete:

  • is one more day without the cash

  • increases the likelihood of a slow response from the customer

But, if you rush and inaccurately bill, it:

  • reflects poorly on your company

  • creates a communication drag

  • erodes trust on future billing

A customer hesitating to approve a bill because they have to “remember” or have questions significantly increases the likelihood of late payment.

Shorten receivable terms

I’ve seen a ton of companies make the mistake of either not including terms or choosing “On Receipt.”

In both cases, the terms will often default to their preferred term, which is often 30 days or more.

A due date 14 to 30 days after invoicing is ideal.

Less is seen as unreasonable and can frustrate your customer.

More will result in less urgency by the customer to get the invoice approved and processed.

Going back to the last point on billing quickly, shorter terms require them to address more quickly and while it’s more fresh on their mind.

Offer early pay discounts

Receivables cost you money, time, and stress.

Late payments often leave a negative impression while discounts are seen in a positive light.

By offering early pay discounts, you reward your best clients.

Some bigger companies are incentivized to take this discount if feasible, which essentially “prioritizes” your invoices.

Collect money in advance

Booked hours or reserved products restricts you from accepting further commitments on that resource.

This has a cost, which can be accounted for by collecting partial or full payment up-front.

Make payment easy

Consider taking credit cards and having an online payment portal.

Companies often have different processes on credit cards, which could result in easier approval barriers and quicker payments.

Track your balances

Awareness is the first step to getting money quicker.

Know your trends and track them weekly or monthly.

Numbers trending up could be a signal of:

  • cash flow issues

  • changes in staff

  • changes in policy

Setup a collection procedure

The further out payment is from invoicing, the more time you'll spend collecting.

Create time-based triggers to review receivables:

  • weekly reviews

  • phone call at 35 days

  • letter/reminder at 60

  • last notice at 90

By creating a system, you ensure the right parties are always in the loop.

I’ve seen it time and again… a client reaches out and is contracted to do more work but never paid for the first. When communication is lacking more work will be done before sorting out the payment lag.


Automation has many benefits:

  • reduces the chance of employee error

  • keeps you top of mind with the customer

  • allows more frequent follow-ups without being pushy

Mix in personal follow-ups to mix in a human touch.

By automating some follow-up, you can “blame” that automation for the annoying parts of the process.

But, be sure you keep on top of your records because getting notices after a client has paid is a surefire way to put a strain on a client relationship.

Charge late fees

There are 2 approaches to late fees: punitive or cost of capital.

Punitive is intended to act as a motivating factor for customers to pay but could be looked at negatively.

Cost of capital is just enough to recoup the cost of financing their late payment.

These can either be applied automatically or selectively based on relationships and discussions with clients.

It’s important to include this as an option on your contract, so it’s transparent and upfront.

Get creative with payback (payment plans)

Getting a payment commitment is important.


  • creates documentation

  • allows you to ask questions

  • provides an opportunity for tailored solutions

Some money is always better than no money. Too often deals are made without discussion of terms.

By making the payment a part of the discussion you’re assuring expectations are known.

Think about offering different pricing based on speed of pay.

Kick slow payers to the curb

Good management of customers will allow you to identify bad payers and kick them to the curb.

Ultimately you’re protecting your margin and stress levels.

The only way to know if these strategies are working is to track the numbers.


  1. AR Average Balance

  2. AR Average Days to pay

AR Average Balance is the average balance over a specific period.

AR is accounts receivable, or outstanding invoices.

Track your balance on a schedule that goes with your business rhythms:

  • Weekly

  • Monthly

  • After invoicing

Run your AR Aging Report on a consistent schedule to determine how the balance is fluctuating and pay attention to the trends in the Over 60 and Over 90 buckets.

Record the reasons for each invoice in those buckets to keep track of trends.

AR Turnover Ratio is the number of times you go through your receivable in a year.

First, figure your Average AR on an annual basis.

Then plug in Average AR to the turnover formula.

A higher ratio means you’re receiving money more quickly.

Average Days to Pay (ADTP) tells you the average time to get a payment.

ADTP can be watched at the company and/or customer levels.

A “good” ADTP will change based on many factors but always watch your trends.

One more thing: only deploy one change at a time (unless it’s urgent).

This will allow you to track it and determine what’s effective.

Collecting your receivables is the lifeblood of a business.

The quicker your turnaround the faster you can deploy it toward growth.

When cash is your constraint, you have to start making sacrifices: either slow growth or take outside money.

Wrapping Up

Accounts Receivables processes are really easy to overlook but can make the difference between ongoing operations and a business shutting down.

Professionalism in collecting cash reduces stress on the business and maintains healthy relationships with clients.

Hopefully, this breakdown helped you understand the importance of this more deeply.

Something Interesting

Interested in learning more? Here are 2 ways I can help:

  1. Purchase the Financial Statements Decoded eBook.

  2. Work with me 1-on-1 to optimize your financials and create a financial dashboard that will increase profit (booked through February 2023).

As always, reply to this email if you have questions, feedback, or opportunities to partner. I love chatting with everyone!

See you next week,



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