By Rachael Chiverton, Credit Control and Cash Flow Expert – Rachael Chiverton Ltd
As a business owner, we know some of our customers won’t pay our invoices on time and we accept it because it’s just one of those things in business, right? Wrong.
Ever wondered why some businesses seem to go from strength to strength and some don’t? Thriving businesses make healthy cash flow their priority and they know how to get paid on time. Using defined processes, from purchase order to payment, with right terms, conditions and contracts in place and a regular procedure to follow up every invoice, every month before it’s due.
Late payers create cash flow havoc for a small business. Poor cash flow effectively means there’s not enough money to pay everything but how much is it really costing your business?
There are certain people and bills which without fail, you must pay on time; employees, rent, direct running costs and HMRC.
Ever increasing interest
Borrowing money to meet essential bills, running up debt on credit cards, loans and overdrafts and paying hefty interest makes cash flow matters worse.
Poor cash flow means you risk becoming a late payer too and the price you pay is your relationship with suppliers. If a supplier starts to feel nervous about your ability to pay, they may withdraw any extended terms previously offered or insist on payment up front.
Nothing will stagnate a business like poor cash flow. With nothing put by to seize an opportunity or grow your business through investment, the only option is to stay as you are or borrow more money, at a higher price, potentially with a poor credit score as a result of late payment.
Happiness and health
Then there’s the cost to your health. The continual stress and anxiety which no matter how someone tries to hide will ultimately impact relationships with family, friends, and our ability to enjoy any free time.
What’s the answer?
You can bury your head in the sand and hope it will go away or fix things now.
Look at your terms, conditions and contracts. Could they be improved? Are you applying Late Payment of Commercial Debt? Do you know how much money you are owed and when it’s due? Are you even picking up the phone, talking to your customers before the bill is due? There are so many things businesses overlook and so much they can do to get paid on time.
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