"Happiness is a positive cash flow."

“Happiness is a positive cash flow.”

                                                             Fred Adler - Venture capitalist

At the Big Ideas Collective we know that cash flow is vital to the survival of any business of any size, from the large to the small - particularly the small.  Combine that pressure with the ever shifting, day-to-day challenges of maintaining sales and ensuring good customer relationships and it’s easy to understand when the grip on credit control slackens.

The root of cash flow problems is late payment. Clearly, the sooner the invoice is paid, the sooner the business can re-use this money within the organisation.  Impossible as it is to get every customer or client to pay bang on time, there are certain steps you can take to minimise your number of overdue invoices:

1.    Know your customer...
As welcome as a new customer is, until a product or service is paid for 'a sale is not a sale'! Get to know all you can about your new customer by getting them to provide full company details including contact details of all key staff (the actual buyer of your goods and services, and contacts within the accounts department etc) together with the company's legal entity, company number (if applicable) and references from other businesses they have had dealings with.

2.    Credit checks and credit terms...
Make sure that your credit terms are clear and easy to understand, any quotations or proposals should detail full terms and conditions including payment terms which will help avoid misunderstandings later on.

Carry out a credit check on your customer (there are a number of companies available) and most will give suggested credit limits to use.

3.    Invoicing...
As soon as you have supplied your product or service an invoice should be raised and sent, thereby starting the clock ticking.

Make sure you have all relevant signed order forms, purchase order numbers and proof of deliveries (where applicable).

Your invoice should clearly and accurately show the date, business name and address to include any different delivery address, show any reference, name or purchase order number together with full product or service detail, payment terms, agreed price with correct VAT - don't find out 30 days later that your invoice cannot be accepted as one of these items is incorrect or missing.

4.    Chasing payment...
After setting credit limits and payment terms make sure credit limits are monitored and payment timetables kept to, including calling the customer before the payment due date to ensure the invoice has been received and there are no queries along with issuing of statements and reminder letters plus follow-up telephone calls.

Deal with customer queries quickly and log all collection activity.

5.    Collection...
Unfortunately, in some cases it may be necessary to take things further and consider legal or third party action.  It is important to carry out the action the customer has been warned of in the manner and timescales stated.  Check with your local law practices about their debt collection services, often a formally worded warning is all it takes… BUT before going down this route always give full consideration to the circumstances both of your customer and internally to avoid any unnecessary costs.  Can you look to structure payments in monthly amounts, thus helping spread the cost for the client?  Rather some cash flow than none at all!

As with most things in life, communication is the key.  If you find that you are not able to make a payment, be the first one to pick up the phone to your supplier, stay in control and seek advice.  Keep people informed, just as you would wish to be and keep your good business relationships.