How often does a business have a profitable-looking set of accounts and nothing in the bank? More often than you might think. Yet it’s usually a situation they can control.
The simple truth is that most businesses – even ones that are prompt at sending out invoices – don’t devote enough attention to collecting their money. They think they have no money because it’s sitting in their customers’ bank accounts rather than theirs.
By looking at financial data in the right way and tightening up a few basic processes you can free up cash for investment. The anxiety of wondering whether there’s enough in the pot to pay staff, suppliers, and other creditors, like HMRC, when they come calling, floats away.
Don’t be passive when it comes to collecting cash you’re owed. It’s your money! Never feel embarrassed about asking for it.
Here are some of the routines we help our clients establish:
- Aged debtors reports that highlight large and overdue accounts.
- Automated reminders for accounts that are shortly to become due.
- Automated credit control letters for late payers.
- Clearer invoices to minimise queries.
Keep On Top of Cash Flows
Accurate cash flow forecasting is essential. That way you can be prepared for large future outgoings and avoid spending money that isn’t really yours.
However, there’s no point forecasting cash that will flow into your business if you don’t make sure you collect it.
Cash Collection Always Matters
Potential cash flow problems sometimes get overlooked when business is booming. Sure, there are overdue accounts but is there still enough cash coming in to keep everything safely afloat?
If business slows, cash flow issues rapidly become acute. That’s not a great time to try to fix them. In tough times creditors might be trying to conserve cash by delaying payments. Some might not survive and you’ll be lucky to see a fraction of what you’re owed.
Other effective tactics you can deploy include:
- Credit checking new customers.
- Charging deposits.
- Incentives for early payment.
- Shorter payment terms.
- Monthly billing by direct debit.
Effective cash collection is one of the most effective ways to ensure the financial security of your business. Don’t delay. Be better at getting paid.
Talk to us if you need help making it happen.
Make your numbers make sense. Contact us at Rosy Jeffery Chartered Accountants on 01297 639 457.
