The ability to increase the speed at which cash flows in to your business are numerous, some or all of them can have a dramatic effect on your cash flow position. Listed below are a few guide lines that all businesses should consider and address.
Sufficient and up to date credit information is readily available through a variety of approved credit bureaus - these will suggest a credit limit and advise on payment history.
It has never been easier to make informed judgements in respect to relevant client credit limits.
Trade references should be taken as part of the account opening process, but be aware that it is common practice for businesses to pay a few suppliers on time and give these as references to show best payment practice.
Often initial orders are placed on a C.O.D basis - Cash On Delivery, other variations include payment by bank-transfer, credit card payment, online payment all of which are cash risk limiting.
Most online accountancy systems allow for automatic email reminders to be actioned and set to encourage clients to pay to terms, and they can be scheduled as appropraite.
A credit application form should be given to every prospect client ahead of time and ahead of any orders placed. How many times have suppliers been pressurised in to delivering goods without the due process of credit application approval. This is a significant risk.
A crucial part of the order process is to install a sense of urgency in to the people and process to maximise the efficiency of order receipt and handling.
It is essential to map this process from start to finish and to ensure all participants in the process are fully trained and have associtaed KPI's (Key Performance Indicators) in place.
After all one risk of poor cash flow can mean that wages are paid late therefore it is essential that training, recognition and staff buy in to the process is key.
Speed of invoicing is key and every delivery to account holders should be an automatic process as soon as the goods leave the premises on route to the customer.
An obvious one but a key consideration is to ensure that the invoice holds all the relevant information needed to allow it to be passed for payment immediately.
Include specific information on your invoice including the due payment date, any discount for early payment along with the early payment date due - due dates should leave no room for excuses.