Cash is King!

Poor cash flow is one of the most common reasons for business failure. You work out how much money you need to meet the set up costs. It’s just as important to have enough working capital to tide the business over till money from customers starts to come in and to provide a cushion in case some of them pay late, or not at all.

Good credit control is vital for healthy cash flow. It’s not just about collecting debts- it’s about making good decisions about giving credit in the first place, monitoring things carefully, and then if things go wrong, taking prompt and effective action.

Here are a few ideas to help:

  • Know your customer: sole trader, partnership or limited company?
  • Set a credit limit and stick to it.
  • Trading terms and conditions minimise the scope for disputes.
  • Keep an eye on payment patterns; if a customer suddenly starts taking longer to pay, find out why.
  • Have a credit control policy/timetable to deal with late payers and stick to it.
  • Prepare before making chasing calls; know all the details and what you want to achieve.
  • Get a commitment to action from your customer.
  • Do what you say you will do; if you’ve said you’ll call back in 7 days, make sure you do it.
  • Claim interest and collection costs if possible.