5 Golden Rules For Healthy Cash Flow By Kriya
CONTACT KRIYA TO DISCUSS IMPROVING YOUR CASH FLOW
‘Cash is king’ and is the lifeline of any business, the fuel to keep the engine running. Without cash, profit becomes irrelevant. Thousands of profitable businesses fail every year because they don’t have cash. With the correct tools for healthy cash flow management, your business can stay in control and make sure that you’re always in the best financial position that you can be with creditors and debtors.
Achieving positive cash flow takes work.
One thing that is particularly key to cash flow management is good credit control.
Establishing strong relationships, built on trust, with your suppliers and clients is important – but never at the cost of your own business’ livelihood!
Increasingly long payment terms and seemingly infinite competition has left many companies at the mercy of their large end customers. A devastating number of businesses are forced to close each year because their customers owe them money – don’t let yours contribute to this statistic.
A systematic and well-planned credit control strategy is essential for any growing business and will certainly help keep the wolf from the door.
Our five golden rules will make sure you’re able to maintain excellent relationships with clients, invoice efficiently, keep your business in good health – and get a credit-control policy in place that your customers respect and adhere to.
‘Credit control’ is the system used by a business to make certain that it gives credit only to customers who are able to pay, and that customers pay on time.
- Set an upper credit limit for each of your customers.
This should be a bespoke limit for each. Conduct research; obtain references from other companies who have traded with them, do your own credit checks – these can be obtained easily and affordably online. It is incredibly important that you assess the risk you’re exposing your business to when arranging a new credit agreement.
Once the limit is set – don’t budge!
We understand that for smaller or growing businesses it can often be tempting to accommodate credit requests – but don’t expose yourself unless you are certain.
The bottom line is that the smaller you are – the more vulnerable you are. - Decide a minimum order size for credit accounts
Make sure you’re in control – your sales contract should remind customers who benefit from a credit payment option that the goods belong to you until payment is received- even after they’ve been delivered.
Don’t be embarrassed to create rules and stick to them. Obtaining references, checks and setting order thresholds all help to convey professionalism and show that you mean business. - Use good customer service to your advantage
This is a double win where you’re concerned. Calling customers to check to see if deliveries have arrived and confirm their satisfaction is useful and courteous.
It’s great practice, you receive feedback and it also gives you a chance to ensure you’ve got the correct contact details for the payment communication. Happy customers and happy you. - Understand the payment practices of your customers
Be aware of payment terms. Ask questions and do your research, before you trade.
Armed with all the facts you can plan or seek out alternative cash flow solutions.
Does your customer make all their payments on a certain day each month? On an ad-hoc basis? Only once every three months?
As you build stronger and stronger relationships with your customers you will know their habits and this empowers you to line up cash flow finance if you need it. The more you know, the stronger your position. - Have a process
And follow it! Within your business establish a clear procedure for dealing with invoices and collecting payments. Make sure that you invoice promptly – practice what you preach. This is vital if you want to demand efficiency in return.
Set aside time each week specifically to chase payments and create a strategy that gradually escalates the pressure on those that don’t pay.
There are great tools out there to help you with invoice chasing and collections – chaser.io is one example – automatically emailing clients to chase payments, with increasing frequency – taking a load off your mind.
Be polite. Be persistent. Don’t apologise.
