Job done but no cash?
With one of the biggest reasons a business fails sited as bad cash flow, why are so many businesses giving away free credit?
Here are the top three common mistakes highlighted:
There’s simply no hiding from it, poor cash flow will cause huge problems, even for the most profitable and larger businesses. When the cash flow dries up, there are the sleepless nights when it’s difficult to meet payroll, irate phone calls as you default on supplier and loan payments and worse case, you’re forced to cease trading.
So, what is going on here?
I see three common mistakes. The first is in awarding very generous payment terms (or simply no terms at all) to customers. At a time when banks aren’t keen to loan money, why are you?
Now I get it, we all see larger businesses forcing us to accept payment terms of 30, 60 or (gulp!) even 90 day terms for us to get paid. So naturally we assume this is normal practice – but can you afford to deliver your product or service then wait a further 90 days from completion to receive payment?
In case you were in any doubt, let me tell you – You are NOT a bank!
When you deliver your service or product, you are entitled to be paid. I personally recommend terms with payment on presentation of invoice. Take a look at what you’re offering today.
The second mistake is in timely invoicing. It saddens me to find businesses invoicing days, weeks even months after the work is done. Yet do not fear, this is one of the easiest things to fix.
The last piece of the cash collection puzzle is to proactively chase up on payments. As if long payment terms weren’t enough, you can’t ignore those customers who pay so damn late! The average SME’s late payment burden is £32k here in the UK. Many owners take major pay cuts and suffer high overdraft fees to try to stay afloat.
Do as one credit controller I worked with did, buy a wig, pick a new name and act the part of debt collecting Debbie for the afternoon! Whatever it takes for you or your team to bring in that cash asap!
If you would like to discuss your cash flow dilemmas and devise a plan of attack to get the money in your bank quicker, don’t be shy contact me on firstname.lastname@example.org