Money makes the world go around
As your cashflow relies on money coming in before any money can go out, waiting for your clients to settle up can be a nightmare. But late payments are all too common, unfortunately. According to Pay on Time, an organisation promoting prompt pay in the UK, only a third of PLCs pay their bills within the 30 days set by law and a quarter of business failures come as a direct result of cashflow problems.
Mind your business
There are many economic reasons for making sure invoices are paid on time. Not chasing up money owed to you can weaken your supply chain and potentially threaten future business. It can imply you are poor at management and damage your reputation. It can create the impression that the buyer is in difficulty and it’s bad for the economy as a whole as it restricts growth. Yet all these scenarios are easily avoided with a bit of forward thinking and good credit management.
It’s easy to let the admin and invoicing slip when you are running a busy firm, but having a strong finance policy will enable everything else to run much more smoothly in the long run. Make sure you:
- Set out payment terms at the start of each contract
- Monitor payments regularly. Setting aside even half an hour a week will ensure that none slip through the net
- Plan in advance how you would settle a dispute if a client questioned the invoice
- Develop good relations with your clients
- Inform all staff about your policy to make sure you’re all working towards the same aims
Factor in finance
Ideally, it’s a good idea to build up a ‘cushion’ to tide you over financially if you are waiting for a payment, but in reality this is easier said than done in a tough economy. Find out what the best borrowing option is for you, whether it’s a bank loan, overdraft, private investment or a factoring facility. One of the advantages of factoring is that it can be completely confidential, meaning your client won’t know that a third party is involved and preventing your business’ reputation being put on the line by the knock-on effects of not being paid.
What goes around…
Don’t forget that business works both ways! Keep up to date with your bills and make sure that you always pay suppliers on time. If you get a reputation as a reliable customer, others might be more likely to honour your invoices.
For more information about setting up a factoring facility, get in touch with Simply Factoring Brokers on 0330 134 2826 and let us set you in the right direction!