Monday, 6 February 2017

Cash Flow is King




Whether you are in business or not, you’ll have heard the phrase ‘cash flow is king’, many times before. The saying has never been more true in this time of uncertainty when businesses of all shapes and sizes are just paused waiting to see what happens next This is making the mammoth task of  trying to balance the books even more difficult than usual.

One of the most difficult tasks any small business owner can face is how to chase up an overdue invoice. I say difficult because the SME has to navigate a tricky path between having their bill paid and not falling out with the customer. Here are some tips that will help any small business owner chase up overdue invoices:

Check payment runs - find out when customers make payment runs and what the cut off is. There’s no point in submitting the invoice on the 20th if the cut off for that month's payment run is the 19th!

Make it easy to pay – You should have a clear collection policy in place outlining credit terms, how you will collect money and any overdue payments.
      
Make invoices clear – having a good system in place to record invoices is key. There are many software packages available like Free Agent that our clients use that make it very easy for you to track payments. Remember also that, the last time a company can object to an invoice they receive is on the day they receive it. After that time, they cannot quibble and dispute it.       
                                                                           
Follow customer instructions – large companies in particular often have strict systems for paying. Maybe they want a special invoice number – so make one for them. Also, ensure that it’s consistent throughout your communications to avoid confusion.

Follow up promptly – Make sure you have a consistent collection procedure and always follow up as promptly as possible. Keep a close eye on patterns in which clients generally pay; and ask yourself whether this fits in with your billing cycle? If the client does not pay ten days after the invoice is due, send them a ten-day letter re-iterating the fact that the invoice is due and (politely!) asking for payment.

Be polite – Shouting threats is not going to do you, or your business, any favours. If all else fails, and the client is ignoring you, or refusing to pay the bill, then consider whether you really want their business in the future, and make a decision about whether or not it’s worthwhile to apply to a county court (used to be known as small claims court) to claim money you’re owed by a person or business. You can process a claim for money owed up to a value of £100,000 online. This covers most debts owed to SMEs; but if the debt exceeds this level, consult a solicitor. More information can be found at www.gov.uk/make-court-claim-for-money


Consider as well that the business could also be going through tough times, or they could be unhappy with the service you have provided. Either way, your main aim is make them pay their bill. Remember cash flow is king. 

This article appeared in Huddersfield Examiner, Kirklees Business News February Edition page 14