It’s often said that cash flow is the life blood of any business – and in turn, SMEs are often described as the life blood of the UK economy, making it doubly important to keep them ticking over healthily.
Here are 5 of the best ways to keep your cash flow fluid, whatever the size of your business, so you can maximise your own prosperity, and your contribution to the economy as a whole.
1. Credit control
It’s actually crazy how many companies – small firms in particular – have no formal credit control procedures in place, when you consider that invoicing and getting paid for work done is really the only way your business makes any money.
Credit control is about keeping a watchful eye on customer accounts, invoicing promptly and politely reminding those clients with outstanding debts, and taking action on any payments that go overdue.
Fail to do this and you’re at risk of not getting paid at all; but get it right and you can get paid sooner even by your reliable customers, putting that money into your business’s cash flow rather than your outstanding invoices running total.
2. Pay promptly
In turn, settle your own debts promptly. This might sound like it flies in the face of maximising your own cash flow, but by keeping your own debts to a minimum, it’s much easier to know how much working capital you have, and avoid any penalties for late payment.
The ultimate dream is for all companies to pay as promptly as possible – by circulating money much more frequently, the entire cash flow of the nation would benefit as a result.
3. Invoice finance
It’s not the ideal option, but where necessary invoice finance can allow you to access the balance locked up in your outstanding customer bills.
Think of it like the business equivalent of a payday loan, but typically with a much smaller fixed fee attached to it – e.g. 10% of the total invoice value – to tide you over until client payments come in.
4. Chase debts
You shouldn’t be living with an ongoing problem of late payment, so if your clients are taking liberties, it’s time to take power back.
Chasing debts sends the message that payments must be received promptly; it can also have its own benefits for your cash flow, by adding statutory interest and penalty fees to the amounts you claim back.
5. Be vigilant
Your cash flow relies on a broad range of different areas of your business, so make sure you know your position – including your account balance, scheduled outgoings, exposure to debt and owed invoices – at any given time.
If you find it difficult to keep on top of all of this, then a full-service credit control company can help, offering everything from initial client background credit checks, to debt recovery on overdue invoices.
If you would like to talk to a member of our team about our services please call 0808 271 8565.