This isn’t for every vendor and customer, but a quick way to pump some money into your business is to discount a receivable. I’ve done it before — creating a win/win situation where both vendor and customer walk away thinking they got a great deal.
Here’s how it works
Let’s say you have a receivable for a particular client — a term sale you made with payments outstanding. For this example, let’s say your customer owes you $3000 on a service you provide. And let’s pretend that payment in full is due three months form now — $1000 payable each month for three months.
Let’s also pretend your business is in deep need for money. You have bills to pay and not enough money to pay everyone.
In this example, what you can do is offer to discount the receivable in exchange for immediate payment. An offer might be to escalate payments in exchange for a 15% discount — or greater. Not everyone will be interested in such an offer, but some will.
The thought is to look at the money you have coming in and think creatively to bring it in faster.
Have you discounted a receivable or escalated payment in exchange for a discount? If so, was it win/win? Would you do it again?
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Sometimes all you have to do is make a call or send an email. Just ask, follow-up. Being there is half the battle. Often that’s all you need to do to surface a new order — make contact.
When someone buys from you, the first thought that ought to enter your mind is What else may they need?
Often times people buy things from us because they’ve reasoned a need for something. They acted on their worldview and exercised a purchase. That’s great!
But often there’s more.
The person making the purchase is somewhat blinded by their worldview — they have a perspective and way of looking at things that led to the decision to make a purchase. But their way of looking at things may not consider all thoughts, ideas, and angles.
Enter the expert.
You are the expert of what you do. Don’t under estimate it. Daily, you live the decision your customer may be making but once in a blue moon. Your perspective of their purchase may result in something different — a greater win/win whereby the buyer gains more from purchasing beyond their initial order and you benefit more because your expertise results in a greater average transaction value.
The idea is to follow-up. Take a careful look at what people are buying from you and truly understand why — what are they trying to accomplish, how can you help them achieve it, and can you add more value simply by engaging and talking to them about their purchase. What may result is a greater level of customer satisfaction and volume of purchase.
Money may move from the table to your pocket.
What do you think?
There may be times in your business-life when there simply isn’t enough money to pay all the bills. Regardless of intent, you may not be able to service all of your debt. At times like this, what are you to do?
Reality is, not all bills are a like. So, for the sake of this discussion, let’s eliminate all bills such as utilities and non-strategic suppliers. For the moment, let’s only consider business debt from strategic suppliers, partners, and similar business relationships. When you get behind in payment, what should you do?
Here are six tips to handling a business debt you can’t immediately pay:
- Communicate – The first thing you want to do is communicate with the company or individual you owe money. Don’t run from them, return calls, and be honest about your cash flow problem. Avoiding the problem doesn’t make it go away and lack of communication only escalates the issue. Simple communication can make many problems smaller than first believed.
- Ask for terms – If payment is due in full, ask if a partial payment can be accepted. Often the person or company you’re dealing with will give terms when asked. For them, it may be an attractive way to manage their risk and exposure in the money you own them.
- Try to find an area of flexibility – Related to asking for terms, discuss with the person or company you owe what their immediate needs are. You may find they have an immediate need for money you can satisfy. You don’t want to appear to be haggling over the money you pay, but sincere in trying to help them while asking for help yourself. Look for a win/win solution you both can live with.
- Don’t make a promise to pay you can’t keep – This is a common problem. You feel a bit embarrassed and desperately want to make a payment as soon as possible so, you give your best case scenario for payment as an expectation. And then miss the expected payment date by days, weeks or months. Your credibility is lost.
- Don’t overextend – Don’t make a payment that’s greater than you can realistically afford. If you think you can pay $X, but feel safer paying $Y, discuss paying $Y. What you want to do is be sure you service debt, but don’t dig yourself into a larger cash flow hole.
- Look for opportunities to factor a receivable – Factoring is a legitimate business relationship with a lender whereby you sell your accounts receivable at a discount. The buyer pays you immediately and collects the payment from your customer. The discount percentage can vary and not all receivables are credit worthy of factoring, but for some companies this is a wonderful opportunity. You can use the money you receive to service debt.
There are six tips to handle a business debt you can’t pay. What would you add to my list?
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UPDATE: Think twice before you use a credit card.
It amazes me I don’t receive more coupons or gift certificates when receiving goods and services I’ve purchased. It’s the perfect time to offer an add-on, upgrade, or cross-sell to a new product. Stuffing a few offers in the envelope alongside your invoice can result in considerable money to your business. And your cost of sale is effectively nothing; you already absorbed the cost of getting the new customer.
And don’t think for a second offers like this don’t work in B2B markets. B2B sales is wonderful place to creatively offer customers the opportunity to up and cross purchase additional products and services you offer.
Here’s how it works:
Someone just purchased from you, they’ve made a decision to be a customer. They made a purchase and are waiting for its delivery. They’re in the euphoria of the purchase. What better time to make an offer?
Will every customer take you up on the additional offer? Of course not. But looking at the cost to make the offer, not many have to to make it a highly profitable addition to your business.
Maybe one exists, but I can’t think of a business where this tactic doesn’t work.
Here are some ideas:
- Position the offer as a one time deal. Make the offer a celebration of them becoming a new customer. Remember, if you consistently give something away, it’s not special, it’s now part of your offering.
- Make it a time limited offer. Create a little urgency to make a purchase decision. Don’t make the offer open ended, give a cut off date of 2-4 weeks.
- Offer an even greater bonus if they act quickly. If someone acts within a set number of days, offer a bonus – an extra something to further entice and reward your customer’s action.
- Whenever you can, make three offers. Offer an upgrade, add-on, and cross-sell. Give the customer the ability to purchase one or all three.
- Partner. This is a great time to try joint ventures on a product that compliments your core offering. Get creative. Whether you make it or not, what goes great with what you just sold? Find someone who provides that perfect whatever and offer it. Be careful to maintain control over the customer relationship.
- Be creative. You don’t have to give the farm away or offer huge discounts. In many cases, you don’t have to offer a discount at all. The point is to put an offer in front of your new customer that compliments and somehow rewards them for joining your team. I really like the idea of offering something that’s not on the price list, something only offered new customers.
- Partner again. Something to consider is who offers a product or service you can compliment? Seek opportunities to include your offer alongside the other company’s invoice. As with all partnerships, only seek win-win-win opportunities – you , your partner, and customer.
Before you close the box or lick the envelope, don’t forget to add those offers!
What creative and enticing offers have you received to up-grade or add-on to a purchase you just made? What offers would you have been interested in receiving?
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