Many business fail each year because of a failure to manage their cash flow and – more specifically – problems related to invoicing. The pressures arising from outstanding invoices can present even the most organised businesses with seriously difficult challenges. But with the correct processes in place, your business ensure it is in the best financial position possible. For this reason, we’ve put together 5 tips for successful cashflow management…
Know your customers
Understanding your customers is crucial in managing your cashflow. By understanding what sort of business they are and their liability, you can plan your invoicing and credit control strategy more accurately. Most importantly, different customers might have different payment practices. Do they pay all their invoices on a specific day each month or is it only as-and-when the need arises? If you build this into your planning, it will make the entire invoicing and credit control process much more straightforward.
Agree clear terms
Agreeing clear terms and conditions from the outset can save valuable time when it comes to dealing with invoices and payments later. If your terms are consistent and your customers understand any late payment charges, this will reduce the risk of disputes in the long run.
Invoice quickly and accurately
Simple but crucial; make sure that invoices are sent out to schedule and that all information is accurate. Even small errors can cause delays. For small businesses, this may mean scheduling your invoicing at a specific time each week or month, and keeping an organised system of filing. Alternatively, online, cloud-based accountancy packages – such as Xero – can help you with this process.
Simplify your credit control strategy
Implementing a simple credit control process needn’t be complicated. The benefit is that it can help to ensure payments are made on time; setting out a day-to-day strategy can reduce the risk of late and missed payments.
Make payment easy
Your customers will prefer a simpler and faster process in terms of payment. The best option is online payment – you definitely want to avoid the use of cheques which can cause delays. A further benefit of online payment is that it can help create repeat business due to your providing a positive customer experience.