As a growth specialist, with expertise in cash flow, I understand that cash is king, without cash within the business then the business will be unable to grow sales or budget for their marketing. There is no business without cash.
Here are my top ten tips on managing your cash flow:
- The credit account – Ensure that you credit check a potential customer before offering them a credit account, it takes a matter of minutes and can save you time and money.
- Clearly define credit terms – It’s important that you ensure the credit terms you are offering are set before you make the sale. This won’t frighten potential clients away!
- Calculate the cost of credit – If possible build the cost of the credit into the quote. This may make it difficult to remain competitive however it’s worth analysing the possible cost to you.
- Check their internal processes – When dealing with a new customer ensure you know what their internal process is when invoices are received such as whether a purchase order number is required.
- Be proactive – Don’t wait until the invoices are due before making contact with your customer. Call them approximately 2 weeks before the due date. This gives them a chance to let you know how they feel the service has been, it also lets them know you care.
- Disputes – If they have a dispute with their invoices the payment wont be made until this has been resolved, make this a priority
- Don’t be afraid to ask for payment – This is your money, you have already paid salaries/wage/materials and have sold the goods in good faith that you will be paid. There is a difference between working with a customer and being taken for a ride.
- Check up – Businesses finances vary from month to month, ensure you carry out regular credit checks (bi annually on a regular credit account). This will let you know whether they are borrowing within their means and will ensure that potential problems are identified sooner.
- Never extend credit to obtain payment – If a customer cannot afford to pay you do not increase their credit limit. They may say to you that in order to pay you they need further goods from you to sell to generate enough funds to pay you however if they can’t afford £100 today can they pay £200 tomorrow.
- Maintaining the relationship – If you have outlined your expectations in the beginning you’ll be able to build a good mutually beneficial relationship with your customer. They won’t be surprised when asked for payment as they will understand the terms you have offered them.
Managing Cash flow is important to any business, for every £1 you grant a customer on credit you have already lost around £5 until you receive payment. If we don’t take time to manage this within the business growth will be severely restricted and in extreme cases the business will not survive. Cash flow literally is a matter of survival.
Jennifer offers free expertise to all Guild members. For more information go to www.guildmc.com or call 0800 525 285.