Running a business presents many challenges for all owners. Most small businesses today tend to possess a limited number of resources. Managing these resources can be very challenging as well as keeping up to date with everything that needs to be completed to run the business.
As far as business growth is concerned, maintaining the health of your cashflow must always be a top priority. Many small and medium businesses today tend to fail or get into financial distress due to poor management of their cashflow. You should never let your own business suffer the same fate.
If you’re busy running your business and multitasking to ensure all processes are completed, there are several ways that can help you stabilise or even improve your cashflow. Here are a few:
Step #1: Review Your Customers Before Providing Credit Terms
Reviewing your customer first before extending credit terms is perhaps one of the most efficient and effective ways to keep your cashflow in a healthy state. By making sure new and existing customers complete a full credit application form, you can gain critical customer information to help determine the type of customer you have on your books, and enable you to complete a risk assessment.
Using the information in the credit application form will enable your business to cross check the information against ASIC (Australian Securities and Investments Commission) records or obtain a credit report from a credit reporting agency. This will give you the opportunity to verify all the information you received from the customer’s credit application form, and also look into there past payment behavior.
Step #2: Validate Your Invoices and Offer Convenient Payment Options
Always ensure every invoice you send out, contains ALL the necessary details that the customer needs to make a payment. Make certain that your invoices have a due date for payment included in the document, and that you have multiple payment options your customer can utilise to pay a due invoice. You should offer flexibility when it comes to payment options offered. There are now a growing number of businesses that offer customers at minimum the option to pay by direct deposit, direct debit, bank cheque, paypal, BPAY and credit card. Make certain that every invoice you send out contains all the options to pay the bill.
Step #3: Never Leave Your Old Debts Hanging
In you have attempted to recover money owed from a problematic customer and spent significant resources pursing a debt, do not hesitate to call and hire the services of a debt collection agency. The earlier you refer a past due account to a professional debt collection company, the better the chances that agency will successfully collect the payment in full. Typically, most small business owners wait 60 days or longer. Some may even wait until the past due account is over a year old! The longer you hang on to the debt the stronger the possibility the overdue debt will become a bad debt. Engaging a debt collector at the first sign of financial distress will give your business the best chance of recovering an overdue amount and improve your cashflow instantly.
Step #4: Call Your Debtors Instead of Sending Them Emails or Letters
Never rely on emails and letters to keep in touch or contact customers that are overdue. It is highly recommended to call them instead. Letting your customers hear your voice demonstrates that you are serious about recovering the balance. At the same time, you also keep things formal and more interactive if any issues in the amount outstanding suddenly arise.
Bottom line, it’s a powerful motivator, and as a result, debts get paid faster improving your cashflows.
Step #5: Always Be Prepared For Negotiations
Cashflow problems are so common nowadays that even your customers will be too embarrassed to let you know they’re facing the same dilemma as you. When calling them up, do try to determine if they are experiencing issues with their own cashflow. This will enable you to negotiate a payment plan with them to help improve your cash reserves. Do not be discouraged if recovering your money will take more time than expected – it is much better than not getting paid at all and every little bit helps your own cashflow.
Your cashflow serves as the lifeblood of your business. If you want to keep your business competitive and growing, take heed of these five easy steps to ensure that your cash flow is always in tip-top shape!
Brodie Collection Services is a full-service agency offering a multitude of services and is one of Australia’s leading debt collection firms. Our objective is to provide you with expert debt recovery and advice at a price lower than the market cost. Our recovery approach is simple – we strive to get to the bottom of why you’re not being paid, then implement steps to ensure prompt payment. With 25+ years’ experience in debt recovery, we have undeniable results proving that debtors will pay once we become involved.
With offices in Melbourne, Adelaide, and Brisbane, we can assist with all your collection & recovery, legal support services, and credit risk management requirements.