We all know that unpredictable cash flow is not good for any business, it blocks the ability to plan for the future or even sustain current activities. Even for businesses who generate good cash flow, one period of uncertainty can be devastating. Keeping on top of cash flow and the time and resources it takes to chase these payments can be a drain on your time that is better spent elsewhere.
We have come up with 5 easy tips to help you get a handle on your credit control to make your cash flow run smoother.
1. Keep in contact with customers
Sometimes invoices get lost or forgotten about, and your invoice goes unpaid due to simple error and not malicious intent. Try giving customers with upcoming payment deadlines a quick 5-minute telephone call. This will help you maintain a good relationship with your customers and offer a subtle prompt that they have an upcoming deadline to pay you.
2. Keep up to date
Keep up to date with payment deadline and any payments coming in. Take a quick look every morning at your ledger to see whose deadlines are coming up and when. This way you can make a pre-emptive strike to subtly remind them of the debt before they have defaulted.
It may also be a good idea to do regular credit checks. Even if you do these when your customer is new to your business circumstances can change very quickly. Keeping on up to date with credit checks can indicate potential red flags early.
3. Concentrate on larger debt
Concentrating on the larger debts will allow you to improve you cash flow whilst you are waiting for the smaller ones to come in. If you are struggling to keep up with numerous debts, pick and choose the largest debts and try to recover those first.
4. Do your research
Think about joining a credit circle. These will help you check the credit of your customers and you will be able to share important information about customers between companies.
If you are overwhelmed by the debt collection process think about hiring a professional. This could be a specialist debt collection agency or solicitor. They will be able to take over the work for you and increase the chances of a successful debt recovery. In the mean time you can go back to running your successful business. You will have to pay for this service, however, if it allows you to get on with making your business successful it might be a worthwhile investment. Get some quotes from agencies and solicitors and do a cost benefit analysis from there.
5. Get tough!
At the end of the day you run a business, not a charity. If someone owes you money they need to pay. Make the consequences of non-payment clear from the outset and as soon as they reach the payment deadline send a letter before action to prove to the debtor that you are serious about recovering the debt owed to you.