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Cash flow is king in every business – 5 simple tips to stay on top
Home » Cash flow is king in every business – 5 simple tips to stay on top
Published: 25th April 2020
This Article was Written by: Steve - Fed Up Chasing
Billions of pounds are written off by UK businesses each year because of late payers. It’s almost become the norm for big businesses to hang smaller businesses out to dry, and not pay them for long periods of time in the hope that they go the wall and they can they hopefully then cut a deal with the liquidators and settle only a small percentage of what was originally owed.
This whole scenario is a very sorry state of affairs, so how can you resolve the issue and ensure your clients pay their accounts on time? Here are some simple tips that can be implemented easily in your business, will deliver results straight away & ensure that your cashflow remains intact…
1. Clearly set out your payment terms and conditions
It’s extremely important to set out your company’s payment terms and conditions in writing. This can be including in your own terms and conditions on your contracts or credit application forms, but also stated on your invoices. Debtors are very conscious of what they have to pay, but if this is not set out in black and white then the company has nothing to fall back on, should the debtor then start to query these. Setting out your terms and conditions in writing highlights them to your clients and creates a clear and consistent approach.
2. Reward Clients who pay on time or early
A good customer is a paying customer. Reward clients who pay on time or early. For Example, give the client a discount off their invoice for paying early or on time or offer them a discount of their next order as long as they pay within the timescales set in your terms and conditions. This will make your clients feel special and valued by the business, which in turn will increase sales and turnover.
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3. Send your invoices out with the goods or services
A lot of businesses raise invoices at the end or start of each month By this time clients could have been in receipt of the goods or services they ordered for two to three weeks already before receiving an invoice from the company. This does not make good business sense, and invoices sent in such a fassion are often paid late. There is a stronger likelihood of an invoice beening settled quicker if they are in the client’s possession straight after the business transaction has happened.
4. Don’t be afraid to approach and speak to your clients about payment
By law in the UK you have to allow clients 30 days to pay before you can pursue them legally for payment. However, this does not stop you calling or emailing them to ask when you can expect payment. Credit Control Departments should have a robust process in place for this. They can call clients straight after invoices have been raised to deal with any queries or disputes promptly, then call or email them 15 & 30 days after the invoice has been raised to see when payment will be made. No one likes pressing their clients for payment, but this demonstrates to clients that the business is very on the ball with their credit control. After 30 days contact should be made with the client on a daily basis, if this contact is not made it implies that the company doesn’t need the invoice paid all that urgently.
5. Invested in good IT system
There are a lots of great CRM databases and software packages to assist a business with cash flow and credit managemen. Successful credit management is about having a clear overview and excellent processes in place to deal with your credit control. In order to streamline the sales to cash process it is very important to use the right software. Specialised software is much more advanced than say an Excel spreadsheet. Spreadsheets can contain a lot of data which can sometimes be incorrect due to data entry errors or changes in formulas, which can quickly lead to the wrong information being viewed. If you invest some cash into specific software for your cashflow, so you can say view late payers at the click of a button, then this will ensure you are on top and one step ahead of your clients for chasing payment.
All of the above are easily implemented into a business, with little fuss or cost. Small modifications can lead to invoices being paid on time or more promptly and in turn benefit cash flow.