Credit Control- Get paid on time!
Get paid on time
You need to be paid on time with your business and being more C.A.T. really helps.
Money is needed to pay bills, pay staff wages, repay loans, investment, and also to pay yourself. If your business doesn’t get paid on time, you are heading for financial problems. Get your credit control right.
A profitable business does not mean that your business will survive, grow and prosper. Profit happens when you sell something for more than it costs us to provide it. That makes you profitable, but until the customer pays you don’t have that cash to pay for things. Remember even a profitable business can run into trouble if the cash dries up.
In this blog we are going to outline some ways to help you get paid on time.
We’ve summed it up by CAT. So if you want to know more please read on
Make sure you implement a robust, practical and effective credit control policy. Include who and how you grant credit facilities, payment terms, and how you deal with late payments.
Your terms and conditions need to be clearly communicated to customers at the outset. It needs to be part and parcel of an agreed way of working together.
Keep your business cash flowing. This is essential and managing the credit you give customers is critical.
It is vital that you know who owes you money, when they should be paying and when it is overdue. You should also monitor cash flow, and ideally prepare a forecast cash statement on a rolling twelve-month basis. Your cash flow forecast should show you:
• WHEN cash comes in and goes out
• Surpluses or shortfalls of cash
It’s great to have policies, terms and systems. However, if you don’t enforce them then you’re sending out the wrong signals to your customer. Your customer will then know they can disregard what you are saying.
It’s a tough balance between keeping good customer relationships and the money for your business. Act with firmness, tact and diplomacy
Be aware of late payments, and don’t let things slide.
• Send reminders promptly – follow up with a phone call if needed.
• Set up dates in your calendar of when to send reminders out
• Add notes to a customer account e.g. if they’ve requested a payment plan and the amount, they have agreed to pay
• When a payment plan has been requested make sure you put this in writing and send it to the client
Do not wait too long to collect this money. Get this right or you could find yourself using your own funds to sustain your business. In the long term this is neither advisable nor practical.
Consider ceasing work for the client until the account is cleared. If all else fails then formal recovery action is an option.
Your credit control will improve greatly if you have a robust cloud accounting system in place. an area that a lot of people find quite challenging. Although credit control is the life-line of businesses it doesn’t always receive the attention it should. Many businesses find many obstacles when dealing with it i.e. not invoicing as soon as work is completed, not chasing settlement of invoices – the list goes on…
Keeping track of what you are owed can be a real challenge. Cloud accounting software can help you, whether you offer credit terms, payment plans, etc
There are a number of cloud accounting software packages on the market but we have found that none of them quite match the potential and capabilities of Xero.
As Xero accredited advisors we are well aware of the power of Xero and know there are many Xero features that will be useful for you and your business.
Cloud Accounting Software – Benefits Of Xero
The Xero package helps:
• Keep track of how much money is owed and when payments are due
• See what invoices you have outstanding (Reports section)
• How long settlement usually takes
• Set reminders to be sent out at the intervals that you require
• Add notes to a customer account e.g. if they’ve requested a payment plan and the amount they have agreed to pay
We have found this to be an invaluable tool that not only significantly reduces admin time but also helps keep our records up to date and all in one place.
So be more CAT and get your cash flowing in!
Thanks for reading this blog and we hope you’ve enjoyed it.
Contact us if you want us to help you with your business cash issues. We can have a cup of (virtual or real) coffee, biscuit and a chat to see how we can help you.
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