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Six top tips to keep the cash flowing
- AuthorCatherine Rickett
Trying to keep a continuous cash flow when running a small to medium enterprise is incredibly hard. You are often so busy trying to find and retain valuable staff members, attracting and keeping clients, and dealing with all of the bureaucracy that comes with owning your own business, that chasing people for money will feel like a job that can wait for tomorrow. It’s a hassle, and frequently fraught with confrontation. Often it can be difficult to have ‘that discussion’ with a client whilst also trying to retain them. Solid relationships are valuable in business, especially when you're just starting out.
Here are our top tips to keep the cash flowing in:
- Be proactive about collecting payments from clients. Have solid, late-payment penalties and collections policies in place, and stick to them. If your client doesn’t hear from you as soon as the payment is overdue, you can be sure that you won’t be the first to get paid; he who shouts the loudest, gets paid first!
- Make it easy for your clients to pay. The easier you make it, the more likely they will pay you. Consider having card payment facilities, BACS, direct debit, online payments or even PayPal.
- Know your client! Consider undertaking a credit check on new or even existing customers if you are having difficulty in obtaining payment. It may be that your customer is unable to make payment due to their own financial problems.
- Consider applying an incentive for early payment. Money is better in your pocket than theirs and whilst you may feel uncomfortable lowering your prices for early payment, sometimes it can cost more to recover debt than any discount applied.
- Have clear procedures. You need effective systems in place, with standard letters going out on the day after an invoice is due, seven days after etc. It’s not an ad hoc ‘admin chore’; you need to be strict with yourself and your customers.
- Keep a ‘cushion’ of, ideally, three months' operating expenses to protect you from unexpected cash flow issues. Bad payers are a business reality and if your company is working from an account balance of nil, one slow sales month could mean instant disaster.
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Here at Roythornes, we understand the need to preserve relationships so that commercial agreements can continue. We are here to help, and to have those difficult conversations for you. You may think that you cannot afford a solicitor - the fees are too high, or you don’t have time to speak to anyone. But would it surprise you to know that we can send a Solicitor’s Demand Letter for just £5.00 + VAT?
85% of our Solicitor’s Demand Letters provoke payment in full. Even if the problem is not resolved at that point, our clients are under no obligation to instruct us to commence proceedings. Often they choose to because of our excellent reputation, and the successes we have had in the past.
It’s simple to instruct us once you are registered as a client with our online matter tracker. Clients are able to upload instructions, check the progress of their matters and request a call back at any time of day or night, meaning that we are accessible when many legal advisers are not.