In an economic downturn customers want to hold on to their money for as long as possible, however, where business profits are being squeezed, cash flow becomes a necessity.
Irregular cash-flow can be a big problem for small businesses who rely on regular cash-flow in order to pay their own debts, yet worry at the same time about retaining a positive relationship with the customer.
These 10 key points may assist your business in keeping the cash flow flowing:-
- Consider whether you should be trading with this customer at all;
- Know your customer;
- Ensure that you are clear on price;
- Use clear, fair and reasonable terms of business;
- Consider interim billing;
- Ensure invoices are delivered promptly and that they refer to your terms and conditions;
- Ensure that the payment date is clearly stated on the invoice;
- Ensure you have an efficient credit control system that kicks in and works like clockwork as soon as the invoice becomes overdue;
- Ensure your terms of business contain sanctions for late payment;
- Ensure you claim your legal right to interest and compensation for late payment of commercial debts.
Final Thought: Know Your Debtor – Bad debts can be prevented by tightening up credit control and terms and conditions.