In the UK, around 25% of British businesses fail to financially plan
ahead. Around 6% of companies rely on credit cards to manage
fluctuations in cash flow, whilst 4% use business loans and
approximately 17% use the method of either decreasing or increasing
staff numbers to deal with the issue. In addition to this, figures also
show that around 18% of businesses suffer a cash flow crisis at least
once a month.
However with effective cash flow planning and cash flow
forecasting businesses will have more control over its finances. Getting
clients to pay on time is perhaps one of the most effective way of
preventing cash flows issues, although this is definitely easier said
than done. If possible, Positive Collections would recommend negotiating
a percentage which is payable upfront to minimise the impact of any
eventual late payments.
Recurring issues involving payment delays
can have a negative impact on your cash flow so it is often best to seek
alternative finance solutions such as invoice factoring which enables
businesses to unlock cash capital from unpaid invoices. If you are
finding it difficult to stay on top of your businesses cash flow, visit www.positivecollections.co.uk
to see how we can help you control your credit or recover any
outstanding debts. Remember, most businesses fail from a lack of cash
flow then from a lack of profit.
Here are some tips to help you manage your businesses cash flow:
PAYMENT
TERMS: always ensure that your business has a formal collections policy
set in place, so that clients can pay on time. Don’t be afraid to ask
for payment and always make payment as easy as possible for your
clients. When asking for payment it is advisable that you quote your
bank account number on your invoices so there is no excuse for delays.
Asking for direct credits or automated payments is also recommended to
avoid delays and payment issues.
PLAN AHEAD: always work out when
cash will be coming into your business and when it will be going out, so
that the funds are already set up to make the necessary payments. By
preparing cash flow forecasts throughout all the months/seasons of the
year so that you know that your business will survive through its down
periods. If you are struggling to predict your sales is recommended that
you review all your outgoings first and then see how much you need to
sell in order to cover your outgoings. The rest is then profit.
TIMESCALES:
always keep track of how long it takes your clients to pay you.
Remember the better your debtor days the great your cash flow.
CLIENT
EXPECTATIONS: delivering a service or a product to high standard that
meets your customers’ expectations is essential. Chasing payments for a
job well done is much better then chasing payment for a poor service or
product.
INVENTORY: always ensure that you have enough stock for
trading, factoring in any changes in demand. Measuring your inventory
turnover enables you to sell slow moving products, helping your business
turn its stock into cash.
INVOICES: this is essentially the part
where you get paid, although it can often be a struggle especially if
your clients are also suffering from a poor cash flow. By setting up a
invoice management system, you can not only improve your cash flow, you
can also reduce paperwork whilst saving both money and time chasing
payments.
At Positive Collections, we provide an effective online
credit control system which is completely FREE. Our debt recovery
service also enables us to chase any outstanding invoices/payments on
your behalf for just a one-off fee of £4.99. To find out more simply
visit www.positivecollections.co.uk or simply call us on 0208 313 7887.
