The New Year period is a traditional time to make a new start – but that can be difficult if you’re facing cashflow problems.
However, a logical approach to your outstanding invoices can help to make sense of any overdue accounts and get things back on track for the new year.
Look again at any payments you’re waiting on, and be realistic about the likelihood of the customer paying up.
Does the customer have a good credit history with your company? Have they missed payments in the past, or is this the first time?
Persistent offenders can be more trouble than they’re worth, so consider whether you should put the client on your Stop List, if you have one – meaning you refuse to take on any more work for them until they have settled their debt.
If you’ve grown rapidly over the past year, this January could present you with a much larger admin burden than it did in 2012.
Do you have the time and capabilities to keep track of the number of invoices you currently have outstanding?
If not, you might need to consider hiring somebody to take care of your finances, or outsourcing your invoicing and credit control processes to a professional firm.
Finally, are there any outstanding debts that have simply been owed for too long? It can feel like you’re doing the right thing to give clients extensions to pay up on overdue invoices – but there needs to be a limit.
If you have clients on your Stop List, you’ve given them longer to pay and offered to take payment in instalments, and they still haven’t settled their account, it’s time to take more formal action.
CPA can help you to reclaim what you’re owed – including statutory interest where applicable – and while you may worry about destroying your relationship with the client, it’s worth remembering that if they’re not paying you anyway, they’re not a customer – they’re a liability.