Sales are on the up and you are making a profit. So where is your cash?

Whether you are a one man band, SME or large company, without cash in the bank it will be hard to keep your head above water, move forward or in many cases to even survive despite your sales order book looking great. Successful businesses are the ones that can juggle the sales at the same time as pay bills, wages, manage stock and administration and save costs all at the same time. Did you know that over 60% of businesses that go bust were making profit but just didn’t have cash?

If you do not get paid on time, you will probably be looking at injecting more cash into your business somehow. Many businesses who find themselves short on working capital reluctantly turn to banks or lending institutions to obtain an overdraft. Many are lured into factoring or invoice discounting agreements with the promise of cash injection. Do you really want to put your hand in your pocket or borrow from family or friends? All borrowing has to be paid back and often comes at a price or a long term expensive contract which in turn eats into your profit.

Tips for getting paid on time:

Make it as easy as possible for your customers to pay you. Ensure your payment terms, the ways your customer can pay you, bank details and the name of the person who ordered the goods or services are all stated on your invoice. If you have been given a Purchase Order number, this is crucial when dealing with larger clients or you will simply not be paid.

Invoice Promptly once goods or services have been provided, preferably the same day as then your credit terms will start immediately.  If you leave all your invoicing until the end of the month and you have also given 30 days credit plus your customer pays you late, you could be into minimum of 60 days before your cash comes back.

One order per invoice. It seems really convenient and time saving to lump more than one sale, job or transaction on to one invoice for ease and hope that it will be paid altogether. This is all OK until there is a query on only one line then it holds up all the rest when, if they were separate, you would at least have been paid the part that was undisputed. Some payables departments will find any excuse not to pay an invoice. Remember this is part of their training!

Send a monthly statement which shows all invoices that you have issued, not just the invoices due or overdue. This makes your customers  life easier when reconciling accounts and it will prompt them to ask you for any missing or lost invoices. Some businesses will only pay when they receive a statement.

Chase invoices as soon as they become due. Calling for your payment is crucial to your cash flow as many businesses will not pay your invoice until you ask where your money is. A business that calls to chase invoices will be paid before a business that does not call and nefore that expected automated reminder. Don’t forget that your customer is also managing their cash flow.

If you are a small business owner you will be all too well aware of wearing multiple hats and trying to do it all. I speak to small business owners who do not relish the thought of having to chase invoices and have those awkward conversations with clients whilst thinking about how to get their next order. You will soon find, if you want to grow your business, you cannot do it all and need to share some of the burden. You have two choices – employ someone to help or employ a credit control service which calls in your company name and keeps tabs on late paying companies. Remember credit control is a skilled process!

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