Improving Finances and Cash Flow
Professional services firms sell services the costs of which are largely made up from people’s time. Whether the charge to the client is based purely on those hours, or is fixed in advance or even contingent on a result, the income needs to cover the cost of that time, the other business costs and generate a profit for the partners and owners.
In many firms, the time between paying the highest costs – salaries and wages – and the receipt of the cash is measured in multiple months, causing heavy demands on working capital and cash-flow. This is often accepted as the norm – if it takes 3 months to do the work, a few weeks to agree everything with the client, the bill is sent 4-5 months after the work started. Many business clients will pay on the due date, usually the end of the following month, although many will drag their heels. Personal clients tend to vary wildly in the ways they pay their professional advisers, from “immediately” to “only when chased … repeatedly”.
As well as looking at how much is invoiced and the balance between fixed, contingent and time-based fees, there are a number of ways to improve both the billing cycle and the payment cycle. As a starting point, do you:
- use professional credit control and debt collection services, whether in-house or outsourced, or rely on your managers/associates/partners to chase debts?
- invoice work as it is completed or wait until the month/quarter-end?
- have any on-account invoicing and payment, or only invoice at the end of the assignment?
With a background as an accountant and used to working with a variety of businesses, helping them to improve their operations and processes, Sue is well-positioned to help you identify the processes within your business which are hindering your cash-flow, create new processes and ensure they are implemented where and when they are needed.
Can you afford to leave things as they are?
Contact Sue to arrange a discussion and see how our services can help you.