This aspect of your business is so important that it’s worth looking at over and over again. The economy is still in the doldrums with more negative news recently, and it’s never been more vital to make sure the cash is flowing in as your products and services flow out.
Regular Cash Flow Reviews
You really need to review your cash situation regularly, once every week or two unless you are so confident that monthly will do. Sit down with your bookkeepers to see where you are at that moment and work out what cash you will need when. What will ensure you have it at the right time?
Do you have the right stock and resources, or do you need to buy in? Can you afford to or do you need to find more cash? Are your cost figures normal or do you need to investigate hikes? Can you cut costs? Most important: are payments coming in when they should?
Consistent Credit Control Activities
Consistency in this area is a must. It’s no good sending out a statement and not following it up for six months. Set up a credit control procedure of regular contact with debtors, and follow it to the letter. They will at least push you up their priority payment list to get you off their backs more quickly. If they are really stuck for the total amount, you might be able to negotiate staged payments and get your cash in that way.
You could also talk to your outsourced bookkeepers about whether factoring arrangements are suitable for your business. That would take the credit control burden from your shoulders and guarantee at least some early income, although it will add to your costs.
The Importance of Credit Checks
Of course you would never offer credit to a new customer unless you were confident of their ability to pay. Or would you? People can do unwise things when they are desperate for business. While some are lucky, others are not and just get taken for a ride. Don’t be one of those. Always check their credit rating.
It’s wise to keep tabs on existing customers too, especially in the current economic climate. You need to know who is in trouble, so you can make sure it won’t be you next.
If you get a whiff of negativity, don’t ignore it. The next step is to talk to your customer and renegotiate your terms. In an extreme case, you might need to stop doing business with them. You may not want to add to their troubles, but you certainly don’t want to land yourself in a cash drought.
Don’t forget to discuss things with your outsourced bookkeepers; they may be able to offer ideas you haven’t thought of yourself.