Why is cashflow so important?
Having a healthy cashflow is vitally important to any business, especially new start ups and small to medium sized enterprises (SME’s).
This is because, without a healthy cashflow position you may not be able pay your suppliers and employees on time leading to all sorts of operational issues that can ultimately lead to the business failing.
Tips for a healthy cashflow:
- Invest some time and effort in investigating the credit worthiness of your customers. A bad paying customer is perhaps a customer you could do without.
- Send invoices quickly. Do not wait until the end of the month before invoicing as that may mean your customers are obtaining extended credit terms beyond the normal 30 days.
- Offer a variety of payment options. Perhaps offer both card payments and direct debit forms of payment via solutions such as Paypal / GoCardless etc.
- Keep detailed records. This is fairly obvious, but often businesses (especially small ones) fail to keep accurate records of who owes them money.
- Schedule your payments effectively. Ensure that you are not committing to too much outlay during periods of cashflow challenges, i.e. whilst you are waiting to be paid for that large order.
- Make sure there’s an emergency fund. Keep a cashflow emergency fund if at all possible. This will enable you to operate with more confidence should there be an element of late payment and bad debt.
- Cut Costs. Review all of your operating costs and look to trim down expenses where this is feasible. Often businesses operate without too much attention of their operating costs, ultimately impacting their cashflow position.
- Cashflow is as Important as profit. Making a profit is obviously important but without the cashflow to function then there is no chance to make a profit.
- Manage credit control effectively. Have the necessary skills and resources in the business to ensure that your cashflow isn’t negatively impacted by unpaid invoices and then subsequently bad debt.
How can we help?
- We operate a successful collection service for the settlement of unpaid invoices, helping to maintain positive cashflow.
- We provide an outsourced credit control and management service for companies that cannot easily provide this function from their in-house team.
Contact us if you would like to know more.
Author: Late Payment Service Team – 2023