14 Dec How To Manage A Healthy Cash Flow and Avoid Payment Issues With Your Customers
When you are operating a small business (or even a large one), there will always come a point in time when you may have difficulties with your cash flow. There are many reasons why you may have cash flow problems, but one of the main reasons why cash flow issues arise is due to late payments. In small enterprises, late payments can become particularly damaging – even to the point where you can become insolvent.
If you want to keep a healthy cash flow and avoid dealing with late payments, the good news is that there are several steps you can take. These are all listed below:
Learn More About Your Customers
The first thing you need to do in order to ease your problems with cash flow due to late payments is to learn more about your customers. So what does this mean? This means making sure that you run the proper credit check on each and every one of your customers before you even think about offering them any terms of credit. With a relatively simple check on their credit rating and history, you can save yourself some precious time and resources as well as headaches in the future. And once you have done a credit check on a particular client, it shouldn’t be a one-time thing – you should make it a point to perform credit checks on a regular basis as you never know when your clients’ circumstances might have changed.
Set Out Terms of Payment which are Clear and Concise
Once you have performed the necessary credit check and assessment on your clients, you should then set out clear and concise terms of payment for them. Do this before any transaction so everything is clearly laid out at the beginning (and your clients will have no excuse and will have no chance to bring up a dispute). When you are setting out the terms of payment with your clients, make sure they understand your policies on late payment and the interest on this, if any. Have your customers sign the payment term agreement so you have something in writing as well. Additionally, you can go a step further: include your terms of payment on every statement and invoice and in the terms and conditions of your contract or agreement.
Prioritise Our Invoicing Tasks
One other way to better manage your cash flow and avoid issues with late payment is to prioritise your invoicing tasks and your invoices. Your invoices should always, always be sent ahead of time and not at the last minute. If you want, you can also take advantage of electronic invoicing rather than sending your invoices by post, which is not only faster, but which also provides you with a record of when the invoice was sent.
Promote Easy Payment through different Platforms
Rather than have your customers settle their accounts by cheque (which can also cause processing delays), why not provide your customers with other means and platforms of payment, such as direct debit or through the Internet? With faster and easier payment platforms, your customers will not have a chance to justify their late payments and will surely pay more attention to their invoices when these are sent to them.
You can also enlist expert help through experienced and trustworthy accountants, such as the central London accountants from GSM & Co. With the proper accounting service, you can be sure that all your financial records and system are kept up-to-date, and you can prepare for any eventuality even before it has the chance to arise.