It costs so much less to keep a client than it does to find a client. If you’re wanting to improve the cash flow of your business, one of the first places to start is with your existing client engagement. Client engagement is linked to both revenue and costs, and therefore significantly impacts cash flow.
A strong client engagement process makes sure your clients play by your rules. It addresses your fees, therefore your profit, as well as the want to buy again, therefore your revenue. and your cash flow. Include a plain language covering letter with your costs agreement outlining the work, the fee amount, your billing cycle, your trust account policy (if one) and your payment terms. Then follow the rules that your client has signed up for.
Client Relationship Management
The sole function of client relationship management (CRM) is top manage the relationships so that clients come back to buy your services again and again. Clients and prospective clients have multiple touch points with the practice during the revenue cycle. Identifying these touch points will identify cost inefficiencies and leverage opportunities. Have the conversation about fees right at the beginning and it will sort out your profitability and cash flow, so long as you then bill it.
The new work generally comes from your network, and this is usually tied to existing clients either coming back or referring someone to you, or from your referral network. What this means is that clients and prospective clients have already made up their mind that they are going to buy from you. They have made that decision based on what you have already done for them or based on what they have been told about you.
Terms and Conditions
Most firms have some sort of engagement processes, but what they do next is critical. Your clients have signed up for your services. They have signed a costs agreement, or have received a shorter form of engagement letter, depending on the matter size. Regardless, they have agreed to your terms & conditions. Yes, that’s right, your terms & conditions.
The terms and conditions that some of you heavily rely on during debt collection proceedings for your clients apply just as much to how you engage with your clients during the service.
Practice what you preach. Follow your own rules. Bill when you say you are going to, money into trust or upfront and top ups along the way, apply the rate you say (no WIP write-offs). If it’s good enough for you to tell your clients to do it, make sure you do it yourselves.
How to Improve Cash Flow
Lock-up is the KPI measurement between when an engagement or costs agreement is signed and when you ultimately receive all the cash for the work you have done. When you engage your clients properly, lock-up is reduced as your client understands the basis upon which you will help them, and that includes how you expect to be paid.
Good client engagement will ensure the client is clear on how much they will be billed, when they will be billed, and when they are expected to pay. If you’re building a house and you don’t pay the builder, they stop work. If you buy some new shoes, you have to pay for them before you leave the shop.
Your practice is a business. It must follow its rules around cash, which means your clients must follow the rules.