Many small businesses are in search of a solution to improve their cashflow.
The first step is often simple – improve your credit control. It can be a delicate balancing act; you need customers to pay to ensure you maintain a good cash flow, but if you push too hard you might drive them away.
Not many small businesses have solid procedures to achieve this goal. They issue invoices and keep their fingers crossed that they get paid. There are some simple processes and policies that you can introduce into your business to ensure you don’t get left with a massive pile of outstanding debtors.
Invoicing and payment collection tips
- Credit check new customers before trading with them
- There is a wealth of information available which will highlight any potential issues with a new customer, it makes sense to be fully informed to minimise your risk
- Have obvious payment terms
- How long does your customer have to pay you, do you include any late fees? Make sure you’ve got a process that states these and then get your customer to agree to them before you start trading
- Get your invoices out ASAP
- Send invoices as soon as you can, ideally as soon as you’ve sent the goods, or delivered the service
- Review outstanding invoices regularly and make a plan
- Review unpaid invoices periodically, highlight the ones that are overdue and have a plan in place to get them paid
- Make sure your customer knows when they are late with an early email. When that isn’t enough, pick up the phone, customers find it harder to justify late payment when you have them on the line
- It can be uncomfortable communicating and following through. You need to make sure you are firm but fair, don’t make threats lightly, but if you do, then make sure you follow through
- Have excellent software
- Software like Xero allows you to invoice, send automated reminders and store your communication in one place – saving you time and money
- Have procedures in place
- Effective credit control will get you paid faster, and that’s good for business. Write down some formal processes that explain how you’ll issue invoices, and what you’ll do if they go past due – and follow them
Nexia Collect offers several credit related services that will allow your business to operate at its full potential. We have expertise in a wide range of areas which enables us to tailor our advice and services to suit your needs.
To learn more information about our Nexia Collect services, please click here.