How to handle bills--input welcome

[JohnV474]

One of the biggest weaknesses of my GTD system has been how I have been dealing with finances, generally. As a startup business owner, when the bills come due there is not always enough money to cover them. This (and the related calls and letters) has been a significant cause of stress and has left me with several anxiety-inducing open loops. I couldn't yet trust my system to work with them.

Well, just today I got an insight that I hope will help others who are still moving from the financial survival to stability phases of life. I decided to treat new, current bills separately from old or past due bills.

Current, new bills that arrive in my Inbox go directly to my Calendar, as the important thing for them is the scheduling. I write what bill it is and the amount on that bill's due date. Note that I am not writing "Pay this bill" on a particular date, because that is not actually a day-specific item. In my Daily and Weekly reviews I will see the bill coming up several days or weeks away and can decide when to write the check. I may decide to actually schedule that, at that point.

Old or past due bills have to be treated differently. They would have appeared on old calendars, and it becomes unwieldy to check old calendars for past due dates of things. Therefore, all old and past due bills will become Next Actions, because they are to be done ASAP but their due date is in the past. These tasks or Next Actions will be seen in my Daily and Weekly reviews, which will serve to keep them current and fresh in my mind, while letting me relax at the same time, knowing they are in a trusted system.

I started a Project along the lines of "Get all old bills up to date". In the Project Support Material, I have a simple one page spreadsheet printout of each payee, the total amount owed, due dates, minimum monthly payments, etc. In my weekly review I would review that Project for Next Actions, and so I would skim through all of the companies I owe money to in order to make sure each payee has a Next Action or Calendar item associated with it.

It took a little mental leap of faith to be willing to treat one type of bill differently than another type of bill. I felt the desire to keep it all lumped together because I couldn't yet trust my system to be watertight. It seems that this approach, which I hadn't actually seen before (that I remember) would help those of us that are, for one reason or another, behind on some bills.

Hope this helps someone.
JohnV474

 

[Jim.Barrows]

Cashflow issues

What you're experiencing is basic cashflow issues that every new business has. Quicken and Quickbooks both will help you keep track of your cashflow. However you can also do it manually. Use a spreadsheet etc to keep track of it, or just a ledger.
What you're doing works for a time, but I don't know how scalable it is.

 

[Brent]

Interesting!

Could you please explain why you don't pay all your bills as soon as they arrive? I do so with all my bills currently, and wonder what pressures you're under in your business to do things that way.

 

[jkgrossi]

Why not just put them in a tickler file? If you pull a bill out of your file on a particular day, and because of cashflow issues you can't pay it right then, just put it into the file for the day that you think you CAN pay it... when that day comes, you open that day's file and pull out your bill. If you still can't pay it, put it in the day's file that you think you CAN pay it. Wash, rinse, repeat...

 

[jkgrossi]

Interesting!

Could you please explain why you don't pay all your bills as soon as they arrive? I do so with all my bills currently, and wonder what pressures you're under in your business to do things that way.

Lack of cash flow... i.e. you do a job, bill the customer and it becomes a receivable. Meanwhile, all of your regular bills come in while you're waiting to collect on this receivable. You may not have cash on hand to pay those bills while you wait to collect, but once you do you can.

 

[sdann]

For items that have a due date you cannot miss, such as Amex statements, lease & car payments, etc., I use the tickler file. I will place a note several business days before the due date in the tickler file (I don't put the actual bill in the tickler file, but you can.) I do this in addition to the Quickbooks alerts I set up, since I don't want to miss any important due date. I will also use the tickler to remind me to download online statements by a particular date.

 

[Brent]

Lack of cash flow... i.e. you do a job, bill the customer and it becomes a receivable. Meanwhile, all of your regular bills come in while you're waiting to collect on this receivable. You may not have cash on hand to pay those bills while you wait to collect, but once you do you can.

In that case, isn't it a @Waiting For?

 

[jkgrossi]

In that case, isn't it a @Waiting For?

Technically, yes... The project would be "Pay XYZ Co" and the NA would be "Payment from ABC Customer" under @Waiting For...

However, that might not be the most elegant way to handle it. For instance, a lot of times the vendor who screams the loudest is the one you pay, not the one who those funds may or may not be allocated for.

I prefer the tickler system for a couple of reasons:
1. There are probably multiple bills - why clog up your lists with those reminders? A 20K Foot item might be "get caught up on bills", but I personally would hate to have 10+ projects related to all of those individual vendors.
2. With the tickler, you can put the ones that must get paid first in the appropriate folders and ones that can wait in later folders. You don't have to go through the list each time a check comes in and say "who do I pay first?"

Also, I wouldn't have all of my receivables on an @Waiting For... list. That's what an Aged A/R report is for. I might start putting ones that age out 60 days + on my @Waiting For... or an @Calls list so I know to pay attention to them, but if you were to put a hundred vendors that owe you money and pay on time on your NA lists, you could become numb to your lists rather quickly.

 

[kewms]

Also, I wouldn't have all of my receivables on an @Waiting For... list. That's what an Aged A/R report is for. I might start putting ones that age out 60 days + on my @Waiting For... or an @Calls list so I know to pay attention to them, but if you were to put a hundred vendors that owe you money and pay on time on your NA lists, you could become numb to your lists rather quickly.

You let your receivables get to 60 days? Yikes!

I start pestering clients within 30 days, and cut them off after 60. Most are sympathetic to the fact that small business owners aren't in a position to carry their customers indefinitely.

Katherine

 

[jkgrossi]

You let your receivables get to 60 days? Yikes!

I start pestering clients within 30 days, and cut them off after 60. Most are sympathetic to the fact that small business owners aren't in a position to carry their customers indefinitely.

Katherine

Honestly, it depends on the client. Luckily, we have some rather large customers who pay within 10 days to get their 2%, so we can allow some of the others to float a bit. One in particular has 17 plants across the country, and each plant settles their invoices separately. I know they're going to pay, because they have a good track record, it's just a matter of how long we let it go before we start to reel them in. 60 days is about it, and at that point they go on my @Calls list.

 

[sdann]

Also, I wouldn't have all of my receivables on an @Waiting For... list. That's what an Aged A/R report is for. I might start putting ones that age out 60 days + on my @Waiting For... or an @Calls list so I know to pay attention to them, but if you were to put a hundred vendors that owe you money and pay on time on your NA lists, you could become numb to your lists rather quickly.

I agree completely. . Use your personalized system to tickle you for certain accounting activities or perhaps open a project or two for a delinquent account etc., but it is best not to use a GTD system as a cashflow manager.

 

[ellobogrande]

For items that have a due date you cannot miss, such as Amex statements, lease & car payments, etc., I use the tickler file. I will place a note several business days before the due date in the tickler file (I don't put the actual bill in the tickler file, but you can.) I do this in addition to the Quickbooks alerts I set up, since I don't want to miss any important due date. I will also use the tickler to remind me to download online statements by a particular date.

David Allen gave an example of this in a live seminar I watched. He suggested that when you receive a paper bill that you need to pay by paper check, determine the last date that you can put it in the mail so that it will arrive in time to avoid a financial penalty. Then write the check, put it in the envelope, seal it, stamp it, and drop it in the tickler file. When it shows up later, put it in the mail (

 

[JohnV474]

Thanks for the replies

I appreciate the discussion this post has stirred up.

Were my business larger and better-established, then bills would be paid the moment they arrive. The nature of my particular work is that you do work and are not paid for several months, at the earliest. Many times you are not paid for over a year. For someone breaking into the industry, this means you fill up your funnel of Accounts Receivable and then the checks arrive later on, while you struggle to get by. There are more conservative approaches, of course. It is just a matter of patience and determination before this financial topsy-turviness rights itself.

I am finding that the Calendar for due dates and tasks for past due bills is working more effectively than having a single list of Bills or of Past Due Bills, and is also working more effectively than using the Tickler file for the same purpose, though the Tickler file is a close second.

Thanks again,
JohnV474

 

[kewms]

Depending on the nature of your business, you might see if you can develop a portfolio of projects, with both longer and shorter payment cycles. As a writer, I have projects ranging from 500 words that I can throw together in an afternoon to multi-month efforts of 40,000 words or more. The small ones do a lot to smooth out the cash flow.

You might also look into receivables financing of various kinds, from either your customers or outside organizations. This essentially uses your receivables as collateral, with which you secure a loan to cover your operating costs in the interim. Yes, you pay (tax deductible) interest, but the reduced strain on your credit rating might be worth it if your cash flow is so tight that you have substantial overdue payments.

Katherine

 

[Cpu_Modern]

Billing can be handled several ways. A lot of places bill by the project, usually breaking it down into thirds. I bill monthly for tasks completed during the previous 30 day period. Still others choose to work on retainer. That's agreeing on a set fee for a set number of hours each month. Overages are billed in addition. In any event, you'll want to get some money upfront.

From an article on the web. The linked-to article is a bit off-topic. I couldn't find again the one where the author explained in detail how he does his thing. But maybe it's a start, hopefully.

 

[DStaub11]

I used to spend a lot of energy paying my bills right before they were due. Now I schedule time every two weeks (right after weekly review on Sunday) to catch up all finances. As bills, checks to be deposited, and bank statements come in, they all go into the Finances drawer (plastic drawer at my desk). I pay whatever I've got, regardless of due date. Exceptions are the credit card bill and the mortgage, reminders for which go in my tickler document. This has been working well for quite a while.

Do Mi

 

[DStaub11]

Oh, on the issue of accounts receivable: my clients pay 30 days after I deliver. Those records are in an Excel file, which I review for late payments during my financial review. Calls or emails to clients then go on the NA list.

Do Mi

 

[Oogiem]

Honestly, it depends on the client.

I'm also running a small business, but my terms are cash at delivery or net 10 days. Only after long experience will I allow a client to pay on a monthly billing cycle and if they miss or are late no more product at all until they get current and cash on delivery from then on for quite awhile again. But my products are perishable. All the farmers I know who sell direct do it by cash only or like I do. For some things I get paid up front (custom cuts for example).

 

[sdann]

I have some prompt-paying clients and really have not had many collection issues. However, I sell quite a bit to the government and their contractors. Usually the contractors pay rather promptly, but the government always takes longer. It doesn't always work out as neatly as one would like.

 

[wordsofwonder]

It doesn't always work out as neatly as one would like.

And, one doesn't always have control over the payment cycle on which your clients operate.

Like kewms, I am a writer (and photojournalist), and a great deal of the work I do is for magazines and newspapers. When their payment terms are "we pay when the article is published, 5 or 6 months from now" (two magazines I've worked for, and the norm in that industry) or "we send the invoice to the head office in Montana, and they pay it when and how they pay stuff" (one of my newspaper clients), I have little ability to influence that.

When the nature of your business is such that you can't bill Net 10, two survival strategies help even out the cash flow:

1. Take on a variety of work. As has been pointed out, quick projects with short turn-around times will help even out the cash flow in between the larger, slower-paying clients.
2. Take on a consistent stream of new projects. If you have a new project going every month or every week, you start to get consistent money coming in every month. Sure, it takes a while to "ladder up" your A/R so that you have money coming in at the same rate new work is going out, but consistent new A/R helps a lot when your clients take a while to cut loose a check.

Another option, now that I think about it, is diversifying what you do, so that you get a range of clients. For example, the bulk of my work (or, at least, the portion of my work that's not wrapped up in the software company I'm trying to phase out of) is writing and photojournalism. But, since those clients often take a while to pay, I also do some portrait and commercial photography work. Those clients might not be as plentiful as they would be if that were my only focus, but the COD income from the portraits helps even out the other income. Multiple streams of income can equal more consistent income, if the streams don't conflict with one another.

-- Tammy