Use Software to Chase Late Payments
Late and missed payments affect businesses considerably. If you do everything manually, you could spend hours at a time working through the accounts, finding those who have bad debt and then chasing up the payments. You run the risk of missing someone, missing an incoming payment or forget about a bad debt altogether.
Introduce a software system that will chase the late payments for you. There is plenty of software available for purchase and it will cut down the time that you need to spend – and cut down on the number of employees you need for the late payments. This will free up some time and money to put back into the business.
Check Customer Credit
Before agreeing to setting up a credit agreement with a customer, check their credit. This will help finding that they are unable to pay in the future and have a bad track record of staying on top of their payments. You will gain the money upfront from those who do not have a good track record with their debts.
Set Targets for Staff
When staff have targets that they need to meet, they are more likely to work harder. Avoid purely setting financial targets for them to meet as they will just be concerned about the money being made. Look into target for returns and writing off debt. This then works for all staff. For example, sales targets are focused on finances but if an invoice is written off, create a policy that this is taken from the commission that salesperson made.
Set Rewards for Prompt Payments
Offer customers a discount if they pay by a set date. This increases the chances that they will pay the invoice on time – or even earlier than the date set. If you do not want to offer a discount, look at adding an amount for late payments so that they are affected either way. The most common option is 2% off the amount owed as a reward for paying within 10 days of the invoice or a set fee for late payment.
Set an Upfront Deposit
A large amount upfront may be too much for some so you could set a deposit upfront and the rest required on collection. This is a great way to ensure you gain part of the money owed so there is less to write off should the customer not return.
Improving your cash flow will help your business, even if it is profitable. You will not need to worry about receiving a payment in time for an outgoing and will be able to clear loans off quicker. The five steps above are excellent ways to improve the business cash flow and can be implemented right away.
Cash Flow is the life blood of any business and it is not uncommon for companies to get into financial difficulties at some stage, that’s where the highly qualified teal at www.realbusinessrescue.co.uk can support company directors through potentially difficult times