When running a business there is a lot of focus on making a profit which of course is important but what is equally if not more important is cash flow. You’ve heard the old adage ‘cash is king’ and it’s true!
Getting your cash flow right is vitally important to running a successful business. Get it wrong and it will cause you a massive headache. What do you do when your suppliers need paying but your customers haven’t coughed up yet? Unless you’ve got a pit of money stashed away you’re going to have to juggle upset suppliers while desperately chasing money. Paying suppliers late can lead to poor relationships with your suppliers, possible disruption in supplies and it can impact on your credit score.
Here are some tips to improve your credit control and help encourage customers pay in a timely manner allowing you to effectively manage cash flow.
- Agree payment terms with your client before you begin work
The last thing you want to do is carry out some work for a customer and then find out their standard payment terms are 60 days (or longer.) So have that conversation early on and come to an agreement.
- Invoice Promptly
Whatever your payment terms are the clock doesn’t start until the invoice has been sent. So ensure that you raise your invoice quickly once you’ve carried out the work.
- Make sure you’re sending your invoice to the right person
Every company will have their own internal procedure for how they receive and process invoices so make sure you find this out before you send your invoice.
Find out where you need to send the invoice to.
Do you need to quote a purchase order?
Does somebody need to authorise the invoice before payment can be made?
The last thing you want to do is send your invoice to someone who then leaves it in their inbox and doesn’t pass it onto accounts.
- Make paying easy for them
It may sound silly but don’t forget to put your bank details on the invoice - you’d be surprised at how many people forget this!
There are lots of third party apps which you can use now to allow your customer to pay instantly via card such as Paypal, GoCardless and Invoice2Go.
- Chase your payment
You don’t need to go in all heavy handed but just a polite phone call or email to check they have received your invoice and ask for a payment update a week or so before your invoice is due will remind the customer you need to be paid. Also if the customer has any queries with the invoice this will allow you to resolve them without delaying your payment.
If you are sending your invoice directly from Quickbooks or Xero both have a feature which will tell you when your customer has opened the invoice. It also sends automated payment reminders to the customer when the invoice is overdue.
Bookkeeper Buddy are experienced in effectively managing cash flow and have a proven record of improving company’s credit control procedures. Get in touch to discuss how we can help your business.