Cash flow is often said to be the lifeblood of a business. However, while a company may have a healthy profit, it’s no good without a steady stream of money coming in.
One of the biggest threats to cash flow is the late payment of invoices, but taking action now will help to minimise any problems.
Check customers
Carry out a credit check on clients so that you can avoid problems occurring later. You can conduct a check online, using the information to decide whether credit terms should be extended to a particular client and, if so, how much.
Credit control team
Hire the right people to monitor your financials, making sure that they are able to deal with the provision of credit and are equipped with the knowledge to make effective decisions. If you are outsourcing finance and accounting, you may want to include credit control too. In addition to being able to decide whether a client should be given credit, the team can enable future sales rather than lose custom.
Be clear about procedures
Include your payment terms on each invoice that is issued, in addition to making sure that your terms are available on the company website. Be clear from the outset that there will be a penalty charged for late payment, which could affect future credit. Set out the time frame for invoice payment and give details of acceptable ways to pay. Include as many methods as possible to make it easier for clients.
Tackle any problems immediately
Contact customers as soon as the due date for payment has passed, and don’t supply further goods or services until the invoice has been paid. If an amount is unusually large, consider a flexible payment scheme to make it easier to get the cash owed, although interest should be charged and a credit check performed.
For more advice about credit control, give us a call today.
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