10 Tips for Getting Paid on Time
Small businesses can feel the strain more than most, when it comes to late payments, but the impact can be reduced by following some practical steps to managing your cash-flow.
There is s very common confusion amongst new and inexperienced business managers – that cash-flow and revenue is the same thing. Most businesses spend all their efforts on generating revenue but don’t put the same thought or effort into cash collection. There is still a sense that chasing money is distasteful. The ability to collect the money in a timely way could mean the difference between success and failure in business.
A common complaint from SMEs is that their clients don’t pay their invoices on time. I’ve personally experienced payment delays of up to 9 months! So read on to learn how can you protect your company from constant cash-flow crises:
1) Conduct a full credit check on new clients. This is easy to do and there are a number of free or low cost services such as Experian, Equifax and Noddle which are available online. Don’t do business with companies who have no credit ratings.
2) Make sure everyone is clear about payment terms up front and that it is written into agreements.
3) Be clear about how many days credit you will extend, once the account goes over that time don’t expose your business to more risk.
4) Be particularly careful if you have one or a small number of big clients who represent a large percentage of your turnover as one of these going wrong could bring the business down.
5) Consider purchasing credit insurance. This will protect you in case a major client goes bust owing you money.
6) Invoice in a timely manner. Get to know the accounts payable teams in your client companies and call them if the payment is delayed. I find almost all are helpful and keen to make sure you get paid but frequently, the paper work gets held up in the system
7) Find out exactly how your clients’ payment systems work. Do they do weekly or monthly payments. Check that your invoice has been received and has been approved and is with accounts for payment and it is on the run. Do this well in advance of when you expect payment to give you time to have invoices authorised. Too many companies chase after they expect to receive payment only to be told that there is no record of the invoice.
8) If you are nervous about client relationships and you don’t have a credit controller, create an accounts email which you can use for a seven day warning.
9) On occasion your clients may have genuine temporary cash flow issues. Be reasonable and agree staged payments as this is one way to keep the cash coming and will often buy client loyalty in the future.
10) When all else fails go straight to a small claims court, a summons usually has the desired effect – but be sure that you have tried all other avenues first.
Category: Savings and Tools