Even with an upturn predicted, cash is still tight and customers are much less likely to pay within 30 days, if at all. Here are a few tips to help you manage cash flow in your business:
For large customers you may need a signed contract and a purchase order. Find out what you need and their payment terms in advance. For smaller customers make sure you agree the price in advance so there is no query on your invoice and if possible find out the name of someone in the credit control department in case of a query.
Invoice immediately on completion of the job, or if appropriate take a 25% or even a 50% deposit up front with the remainder payable on completion.
Issue your clients with payment terms and don’t be afraid to ask for what you want. Don’t feel you have to put ‘Payable within 30 days.’ You can, if you wish, put ‘Payment on receipt’ or a due date within 14 days. If you don’t ask, you won’t get.
It is worth taking the time to find out immediately whether payment has come through, and if you use the right accounting software, your bank balance will update regularly so you will know straight away.
If you don’t receive the money when you expect it, ring your contact in the business and find out why. Why not email? Emails are too easily ignored. Your contact may be able to chase up payment for you, or give you the number of the person you need to speak to in their accounts department.
The two other main areas where you can control cash flow are stock and suppliers. Keep a close eye on your stock, as perishable stock or slow moving stock can suck cash unnecessarily from your business.
Finally, check your suppliers’ credit terms, and use them. Bear in mind however that your long term relationship with your suppliers is the lifeblood of your business, and they will respect you and respond to your needs if you always pay on time.