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WHY START-UPS NEED TO PAY ATTENTION TO THEIR COLLECTION (IT’S ABOUT SURVIVING!)

29 Sep, 2016 | Business, Productivity

More than one has already fallen in the battleground, unarmed, after a long process of collection that only slow down its expansion … What am I talking about? Of those startups that have unfortunately fallen into bankruptcy.




Let’s examine in the first place the case of Save, then we will go with Take Eat Easy, and afterward, we will see if ChicTypes will make a change of direction.

Let’s review the history of Save. This small English name of four letters must surely sound familiar, but either way, let’s introduce it: is a French company that was showing incredible numbers in less than 18 months. More specific? Sure. Save went from having 30 employees to 400 in 18 months and in this same time, it went from a monthly billing of 100,000 euros to start billing 100,000 euros … per day. It has more than 100 active sales points (or, corners) in five different countries.

Profit is an opinion, cash is a fact

Okay, those are excellent numbers, but more specifically, what was Save? Actually, Save is a company that provides repairing services for your smartphone and tablet in their repair corners. Oh, all in less than two hours. And apparently, this concept attracted investors: it got more than 15 million euros from several venture firms, some private investors like Xavier Niel, head of Free, also decided to join in.

An effective collection is often impossible when we are going through a strong growth process.

So,  how did this promising company went from such rapid growth to be in a state of suspension of payments? Its founder, Damien Morin, had to admit his biggest mistake: the accounting was perhaps a little too suspicious. Do not panic: being in a state of suspension of payments is not the same as filing bankruptcy. Its final report of 2016 indicates that during that year around 40 million euros were billed. Unfortunately, not all run with the same luck, for Take Eat Easy, they had to fill for bankruptcy, and for ChicTypes, the future will tell.

After reading this, you should consider one thing, an obvious truth: no matter the growth of a company, its billing or the money that could have been invested in it. What is needed above all of that is a bulletproof administration, which allows them to avoid not getting paid and above all, to allow the money constantly enter, achieve cash flow. A Credit Manager can be of great benefit for this type of mission.

Are you still here? Good. I’ll give you some tips that will help you better manage the finances of your business and minimize risk (can we talk about luck?), this way, you won’t end up like the companies we mentioned above.

The key to growth lies in liquidity

First, always remember to keep this little quote on the back of your head: “Profit is an opinion, cash is a fact.” To better understand this little phrase of 8 words, we will compare profits with cash.

Your profit is the direct benefit. It is money that will allow your company to cover all expenses that might result (staff costs, rent premises, raw materials, etc.) from the sales of your products or services of your company. When this number is positive, this means that you have won more money than you spent, right? The benefit is our profit, right? Well, no. This benefit is just a number. You cannot put in your pocket and spend it.

Of course, profit is very important. But it is not as important as cash, the real money we see in our bank account. If your company has a drop in their sales but has a significant amount of money in their account,they will survive. But if your business is “profitable” but doesn’t see many numbers in their account, welcome to the world of collections.

Thus we have seen the importance of preferring cash over profit, but how do we secure the cash if customers are slow payers?




Our simple tips will make your wishes come true

These are some small but effective tips that can be helpful. The first and most important to be effective in this task is to find your own management method. In order to track the invoices that are sent and received, be sure to take into account all sales. Accounting is more than important, it should never be left behind. Keeping a good accounting will allow you to detect more easily the reasons why money is having problems to enter. Is my service not good enough? Is it simply an organization problem?

Do not think notifying your client is annoying

In every contact, you draft you must very specific with the terms of delivery and the payment methods accepted. Another rule that may seem basic, but that needs to be reminded is to make every invoice as clear and understandable as possible, don’t forget to include your contact information. If you haven’t received your payment, the best way to solve it is to simply give a call to your client. Once you place that call, it will be harder for him to avoid the payment and is much faster than having to send an invoice by mail. If the tried this and still haven’t received your payment, always try to notify, notify and notify. Do not think that such reminders can annoy your customer, you provided a service, they have to pay for it and they certainly know it. If after all of this, the customer still hasn’t made the payment, you have, ultimately, of course, the possibility of hiring a collection agency. This alternative is very delicate and should be only considered when there is a true risk that the customer won’t pay.

Finally, another way to make the money arrive faster is offering a discount to customers for early payment. Companies typically offer between 1-3% discount for payments received between one and two weeks after billing.

And finally, of course, use Dunforce. This is a very simple tool that will centralize all your bills and that it will take care of the collection like reminders, receipts, team notifications – finance or sales in the event of excessive delays-. It is some sort of CRM for your invoices. It is something cruicial for your business.

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