Here are some pointers on keeping your business bank balance in the best possible shape:
1. Fast invoicing. It may sound obvious, but the quicker you get bills out to clients, the quicker you will be paid. A lot of companies leave invoicing until the end of the month and post out bills in bulk. Sending out bills as soon as work is completed and using email delivery is far quicker and more reliable. It also cuts out the “I still haven’t received the invoice in the post” excuse when chasing payments.
2. Make it easy for customers to pay you. Direct debits provide advantages for both you and your clients. From your point of view, setting up auto-payments takes away the time and stress of checking to see if people pay when they should, and also saves you chasing them if they are late. The client will also appreciate the convenience as it ensures continuity of service and preserves a good working relationship.
3. Get to know key people in credit control. Building a rapport with the person who clears invoices can reap dividends. You become more than just a faceless person or a voice on the end of a line, and this can help you jump the queue if your client has a system of prioritising payments. Always remember them at Christmas, and a polite thanks for any small favours they do will go a long way.
4. Keep your eye on the ball. Running a business, especially a small one, means that you have to wear many hats. Don’t let other tasks swallow up all your time – set aside at least an hour a week to check the bank and your aged debtors list. If you find it difficult to keep tabs on payments, delegate this task to someone else.
5. Talk to your bank. Your bank manager doesn’t want a nasty surprise if you only let him into the loop when you are at a critical point. Often, they can help manage you out of trouble by increasing your overdraft facility, or by offering a holiday on interest or capital payment loans.
6. Spread payments for big items. It’s often cheaper to buy goods outright, but in the long term, smaller, regular payments will keep pennies in the bank. Try and negotiate interest-free loans wherever possible, but resist the temptation to spend more than you originally budgeted for just because payments are more manageable.
7. Ask for deposits. Don’t be shy about asking for part payment upfront. It mitigates the risk of non-payment, and also stops the client shopping around for a better deal once the deposit has been paid.
8. Renegotiate with your own suppliers. Cash flow isn’t just about getting faster payment from your own customers. Overheads such as insurance and utilities should be reviewed annually, and consider consolidating suppliers and contracts to give you increased bargaining power.
9. Don’t have all your eggs in one basket. On paper, a company can be solvent as long as the monies due in are more than monies due out. However, all it takes for this balance to be upset is if the top few customers start paying late. Spread the risk by making sure that your customer range is wide enough to avoid being too reliant on your top earners.
10. Don’t overstretch the company. Every now and again, a big opportunity may present itself that could potentially transform the fortunes of the company. A big contract also means big risk and temptation – if the company doesn’t have the resources to complete the project to completion, there could be devastating consequences. Only take on work you can realistically manage and save the more lucrative deals when you are big enough to handle them.