Seven Debtor Collection Strategies To Boost Your Cash Flow

There are 32 debtor’s improvement strategies in our ProfitPlus business growth system and today I’ll overview the first seven.

Before I do that… and given your reviewing one area of cash flow improvement, let’s do a quick overview of the six areas which drive your cash flow.

The Other Five Areas Are

(1) Price change to boost revenue not related to increasing the volume of sales,
(2) Reducing the cost of goods,
(3) Reducing overheads,
(4) Paying your creditors slower, and
(5) Reducing your level of stock (inventory).

The increasing volume of sales of higher margin products/services is another way of improving cash flow but the increasing volume of sales (getting more customers) normally costs money to promote and may, therefore, hinder cash flow in the short term.

Remember… the more of the six areas you can work across the greater the positive effect you’ll have on your cash flow and the longer your improvements will last.

Strategy 1 – Get Deposits at Time of Sale

Deposits immediately boost cash your flow as they put money into your bank account before any costs are incurred.

In most cases you want the deposit to cover any out of pocket expenses e.g. your cost of goods, your up-front manufacturing costs, or initial sales commissions etc. The decent sized deposit will also reduce the risk of losing your customer after they have engaged your business.

Some of the items to consider are: (a) sales scripts, (b) terminology used to make it sound more attractive to your customer, (c) process you may need to implement to make things run smoothly, (d) mechanics of how you collect the deposit and hold it, and (e) reducing residual risk as this is actually a deposit.

Strategy 2 – Get Progress Payments Or Monthly Instalments

Progress payments are ways of collecting money prior to the job/work/ service being finalized.  Progress payments are used a lot in the construction industry BUT can be used in a service-based industry, manufacturing based industry and other industries with some tweaking.

Examples being (a) lawyer getting funds into a trust fund and then progress payments as time progresses, (b) builders getting a deposit and then progress payments at specific stages of the job, (c) accountant getting a retainer and monthly installments etc.

The key is to think about your business as “not being your customer’s bank account”. Chasing money at the end e.g. debtor collection (accounts receivable) simply means your sales people were not taught on getting money at the start e.g. deposits and ongoing installments as part of your customer’s contract.

Strategy 3 – Implement #1, and #2 As A Full System

When we talk with business owners, we find out that some of the above two strategies were implemented, partly implemented, and/or dropped off the radar at some point. Systemizing both strategies is critical to the ongoing success of long-term systemic changes which will continue to improve your business’s cash flow.

Both of these strategies working and systemized is the difference between exponential growth and restricted growth.  The results or doing this strategy compared with not doing it:

(a) Your business generates surplus cash with each new customer, or
(b) Your business generates negative cash with each new customer as you get paid in arrears.

Things to consider are paper-based systems, sales systems, the words used with a prospective customer, accounting systems, payment processing systems/facilities, and company culture to name a just few.

Strategy 4 – Accept All Credit Cards

Consider what you spend to get a person at the point of buying… in most cases, it takes a lot of money to gain a prospective customer e.g. sales people, telemarketing, shops rental, banners, billboards, direct mailers, Google AdWords etc, etc.  You don’t want to lose a potential customer because you don’t take credit cards or their particular credit cards.

At a minimum, you should have the major credit cards e.g. Master Card, Visa Card, American Express, and potentially the Discover Card.  And you should have some way of processing online or onsite payments via one or more of the following:, Stripe, PayPal, Amazon Payments, Adyen etc.

If your business is on very tight margins … then look toward charging your customer for transaction fee OR incorporate this cost as a marketing investment cost.

Strategy 5 – Systemize Automatic Payments

Automatic payments are where your staff or you do not need to “remember” to process the payment e.g. the facility does it automatically.  If you invoice a regular recurring amount then this can be done via PayPal,, Stripe, or one of the top 20 service providers.

You can also have invoices sent with online payment processes … this is great to have invoices paid in advance of providing the service or items, and/or at the end.  Your system needs to be set up for (a) subscriptions to be automatic, (b) easy monthly payments to be collected automatically, (c) payment in advance of providing the goods/service and (d) automatic collection embedded in the invoice.

Another thought if you are not able to process in advance or as an ongoing system, you can have the collection process automated e.g. x days the person gets a reminder letter, x + days the person gets a second reminder letter, and X++ days the customer is automatically sent to a collections house for them to collect the outstanding.

Strategy 6 – Bonus for Upfront Payment

Where your business is collecting up-front payments, or you want to put this strategy into your business… you can offer a bonus for them doing this.  In most cases, the bonus is not a reduction in price.  A reduction in price is damaging to your business.

Normally you offer them (a) an upgrade to a slightly better item or service, (b) an item you purchased in bulk that has a low cost to you but high perceived value to your customer, (c) membership benefits, (d) become part of your Facebook private group, and / or (e) exclusive access to a VIP group where they can advanced notice of sales, demonstration days (or other benefits you only offer to people who pay upfront).

There are many ideas which would help your business to stand out from your competitors and make it easy to implement bonuses for Up-Front payments.

Strategy 7 – Setup 3rd Party Financing for Customers

This strategy works a treat where you have a large debtor’s value or where there is a risk of people not paying at some point in the future.  Financing is a well-used service for consumers e.g. car finance, low doc loan financing, consumer credit cards, specialty store cards etc.

Your business offers finance to your customers and a third party gives the finance, BUT you complete the application and make it really easy.  You have already established with the finance company what is needed and you make sure you simplify the process.

This can turn a high perceived price sale into an inexpensive monthly installment for your customers and set you apart from your competitors.

Easy Next Steps

Some of the strategies may seem more difficult to implement into your business, however, a cost-effective process can be implemented easily with our support.  To get started… simply call us for an initial consultation meeting.