Cash is king in any business and cash flow is increasingly important in the current economic climate.
It's very easy for business owners to focus on generating new prospects and servicing existing customers, rather than focusing on work already carried out and money owed. Nobody likes to call chasing money, but it's a necessary part of business. And, as my business coach told me this morning, with Spring in the air, people will be looking to have a clear out and maybe settle some of their outstanding bills.
So how can you reduce old debts and collect money that you are owed? Our top tips are:
- Start as you mean to go on - ensure everyone is clear on the price, terms of payment and methods of payment prior to the start of the contract. Terms and conditions are invaluable to clarify these issues, before work commences
- Credit check customers for large contracts to ensure they can pay before you begin work
- Could you request a deposit to hold a booking, reserve a date etc? If so, this is a great way to check people are willing to pay before work is started.
- Offer stage payments if the contract will take a while - customers may prefer this anyway, as it will assist their cash flow
- Ensure you make it easy for people to pay you - how many methods could you offer?
- Invoice immediately on completion of a job. Don't wait until month end, or until you have some spare time to catch up on your paperwork. Most business owners pay 30 days from the date of invoice - if you're lucky, so the sooner you invoice, the sooner you get paid.
- Send statements every fortnight / every month to remind people what they owe
- If customers owe you money, cease any future work until payments are brought up to date
- Chase outstanding debts by telephone
- If people still haven't paid, suggest a payment plan so the debt is reduced slowly over time
If that doesn't work, it's time to call in some legal help. Our solicitor will send letters of claim for just £5 plus VAT - contact us if you need his help. These are often sufficient to prompt the customers who are holding out as long as possible to settle their bills.
I hope it goes without saying that you should pay your bills on time. Your suppliers will remember that you do and are much more likely to support you in difficult times if you have an impeccable credit history with them. And, when the chips are down, you'll need those friends to count on - so look after them now.
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