Alarmingly, research last year by payments firm Bacs revealed that SMEs are owed £33.6bn in late payments. These are worrying statistics – especially with the increasing amounts of businesses that cannot survive cashflow problems caused by overdue payments. In fact, this lack of business “lifeblood” can have a disastrous impact; which is why managing cashflow effectively is so vital.
These statistics clearly show that more needs to be done to help small businesses chase late payments. No one likes to pay, so here are some useful tips to help get that cheque:
1. Don’t make credit management subordinate to sales:
Make sure sales are reflective to credit. Do not allow sales to overrule the people in charge of credit management.
2. Treat credit management as an enabler of sales, not an obstacle:
Credit management should help define a set of conditions under which you can say yes to selling on credit, depending on each individual customer. Knowing your customer as much as possible on their creditworthiness and payments habits will be hugely beneficial.
3. Develop a well-defined credit policy and stick to it:
Determine a limit and a timeframe and have a clear set of guidelines about when you are willing to give credit and when you consider a payment overdue.
4. See the big picture:
If you have given a customer credit, remember you are now someone’s banker – so think like one. Chasing late payments and absorbing non-payments, can be very time-consuming and costly.
5. Be organised about invoicing and collections:
Set up a routine for invoicing and collections and stick to it. Organisations don’t like to pay, so don’t appear disorganised. Also don’t forget the friendly reminders.
6. Know your rights:
Remember the law is on your side. You do have rights to charge interest on overdue payments. This is not to be used as a threat but as a friendly reminder to pay on time.
These six handy tips can go a long in helping small businesses to get paid. However, this is not the end all and be all.
Share your thoughts:
How can small businesses tick over whilst waiting for payments? What is the most effective way of dealing with late payments? What are the main concerns when it comes to managing cashflow on a daily, weekly and annual basis?
Please share your thoughts and ideas by commenting below or commenting on Twitter @MicrosoftSB