When it comes to cashflow, most business look at how they are going to finance their cashflow gap, how they are going to finance that client that always pays late.
The most common thing missed is that there are things you can do that don’t require any business finance or cashflow funding. It is all about managing your debtor book, here are 5 essential tips to better cashflow.
Cashflow Tip 1
Speak to the person that matters. If you are chasing up an overdue invoice then don’t speak to the junior accounts person, get the name of the person who can make the payment and go direct to them. Get their personal contact details and keep them pinned to the invoice. Address all correspondence to this person, send all emails to them. You get the idea.
If your customer is genuinely struggling to pay you then negotiate. Offer payment terms, offer a variety of ways to pay, consider taking a part payment. If the same customer is always late then change your terms of business when dealing with them.
Get a system in place. Make sure you know what invoices are due when. Get some templates set up to chase invoices, get a system and process in place and stick to it. If offering terms of payment of at least 30 days then send an email reminder before the due date, worded nicely of course. You need to set boundaries and be consistent with asking for payment.
If chasing for payment don’t just talk about getting your invoice paid. Get a commitment and firm agreement of what will be paid when. You are not being awkward, explain to your customer that you need to plan your cashflow as much as anyone else.
Cashflow Tip 5
Check out your customers. Use a system like CreditSafe or Experian to make checks on your clients. These systems will tell you when a client is in trouble or has a poor credit rating, base you terms around this. If the client’s credit rating drops then chase things up quicker and be less lenient with terms.
It is likely that you will need some form of cashflow finance, but don’t rely on it. Sooner or later your cashflow finance will run out and unless you have some decent practices in place you will fall over.
By Dave Farmer