Maintaining cash flow is vital for the success of many businesses, particularly small businesses. Larger businesses may be able to swallow a cashflow deficit for a short period of time. However, for smaller businesses, it could be the difference between success and failure.
Our business debt recovery solicitors have devised some useful tips to help keep your business’s cash flow as fluid as possible. The starting point is to ensure you have enforceable payment terms to ensure you have the foundations in place for the timely payment of invoices. It is best if you can agree on payment terms before or at the time the contract is entered into with your customer. That way, they know what to expect when the invoice arrives.
Firstly, you should consider how long you can feasibly allow your debtors to pay their invoices before that starts to have a negative impact on your business. With most invoices now being sent electronically, it has become more acceptable (and common) for invoices to be payable upon receipt (essentially immediately) rather than within 14 or 30 days. However, when considering how long your payment terms will be, you must also factor in some leeway for late payments, as that will inevitably occur from time to time.
The payment terms must not only set out the length of time allowed for payment but also:
All of this information must be clearly provided to your customer to make paying the invoice as easy and transparent as possible.
Technological advances make it easier than ever to raise and send invoices. There are numerous well-known apps and accounting services which can automatically generate and send invoices for you. There is, therefore, no excuse for not being paid on time.
Equally important is keeping on top of debtors and regularly chasing late payments. Have in place a system of reminder emails that you can send as the due date approaches and also after the due date has passed if payment is not received. Some software will also do this for you automatically, or it may be something your accountant will do.
Whilst it may seem a time-consuming investment at the outset, an efficient system of credit control will pay dividends for you as your business grows.
We understand that sometimes, despite your best efforts, some invoices remain unpaid. If that happens, we are here to help.