In a business, cash flow is crucial. Amongst paying employees and bills to developing your business further, effectively managing cash flow is one of the most important aspects to keep a business thriving.
Whether the business is growing or not, the first step is to create an accurate cash flow forecast. Recording your income and expenditure to help avoid cash flow finance problems in the future.
Every business wants to earn money and make a profit, by offering quality goods and services to their clients and standing out from their competitors. However late payers can jeopardise cash flow so its essential to have a robust credit control process in place. Here are my 5 top tips.
Communication is key, and this should always include telephone calls, it’s much easier to ignore an email. In addition, calls are more personal and allows you to build a better relationship so hopefully you’ll get open responses and they’ll keep to their payment dates.
Contact should be made relatively soon 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 on top of their credit control. After 30 days contact should be made with the client on a daily basis.
2. Clearly set out your Payment Terms & Conditions
It’s extremely important to set out your company’s payment Terms & Conditions in writing. This can be including in your own Terms & Conditions on your contracts, quotes or on your invoices.
3. Credit checks for clients
New and current clients alike, credit checks can tell you how financially stable they are and how timely they are with payments. An effective way to monitor clients and reduce the risk of bad debt.
4. Reviewing your customer base
Make it a regular task to review your sales ledger. Determine regular clients from one-offs and identify any persistent issues, whether late payments or accounts losing money. Try to establish the reasons for consistent late payers.
5. Invoice right first time every time
As soon as possible after the goods or services are provided issue your invoice. Ensure you include the correct reference numbers on your invoices (if applicable), attach any supporting documents and make sure you are sending them to the correct person.
The best way to reduce outstanding debts is to build a positive relationship with your customers, as this makes it easier to deal with problems when they do arise.
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