Whose business are you investing in?
We’ve all done the same thing when we were new in business and wanted to encourage customers to come to us – we accepted anyone who came along and welcomed them with open arms! It’s only later that you realise that they may not have been the best option: they haven’t paid for the goods or services you’ve provided; your cash flow is then tied up in their business, increasing your costs and leaving you awake at 3 in the morning…
For your business to be in the best position, it’s essential that you’re in control of your business and have the proceeds of your hard work in your bank account rather than subsidising anyone else’s.
How? Here are three easy ways to improve matters:
- Clear terms and conditions – invest in professionally drawn up terms and conditions and you will be able to impose them, every time you need to. You can have different terms for different types of clients too remember!
- Know your customer – credit check where appropriate before you do any work, prune your customer list to work with those that will pay you, and be aware of changes in payment patterns which can be early indicators of problems to come. Change your terms for anyone who doesn’t pay on time to recover the extra interest costs; you aren’t a free bank!
- Devise and stick to a debt chasing process – can be really simple but it’s the regular execution that makes the difference. It doesn’t have to be harsh, just firm and fair, and in line with your terms.
Other things to think about are getting the money in to your business before you do any or all of the work, when you have maximum leverage, or at least deposits, monthly payments or milestone payments, all of which get you away from payment after the work has been done.
Like to know more? We’re very happy to help clients improve their cash position wherever possible, so please do get in touch if you’d like to discuss yours. We’re here to help!