Poor cash flow is one of the biggest reasons that companies cease trading. Here are 10 ways to avoid and chase late payments to help maintain a steady cash flow.
You may also wish to charge new customers up front until you’ve built up a long-term relationship with them.
If you communicate from the beginning about when you expect to be paid, you’re less likely to encounter problems and excuses when the time comes.
There are a number of fast, electronic payment methods available today – make it clear that you prefer these and only accept cheques from existing, trusted customers or ban them outright.
If you’re at the stage in your business where you can hire other people to work alongside you, it’s well worth looking into hiring someone dedicated to the financial side of your company.
Good communication is key to improving your cash flow.
Don’t let your customers think they can relax if they don’t pay you promptly.
Again, clear communication from the start about penalties for late payments can help you avoid them altogether.
This will mean you have cash coming in at regular intervals and make it more likely your customer will pay on time due to the smaller payment required.
Contact the customer on a regular basis to remind them payment is due and begin to charge the interest and penalties for late payment you should have already communicated to them.
There are organisations out there dedicated to helping businesses claim the money they are owed. These should only be used when you have exhausted all other avenues.
Businesses are often reluctant to appear heavy handed when debt chasing as they fear that they will lose future custom if they are too aggressive when chasing late payment, but it is important to keep control of the situation so as to recognise a problem and deal with it at an early stage.
Do not hesitate to stop supplying goods to a customer if payment is delayed beyond the usual terms or offer them a cash on delivery basis until the account is brought up to date, do not let a small debt turn into a large one.
The post “How to Improve Your Cash Flow” first appeared on UKPLC.com in April 2014. It features tips from Gareth Underwood at Sage Software.