12 Essential Tips For A Strong Cash Flow
‘Happiness Is A Positive Cash Flow’ isn’t just a funny bumper sticker, it’s a deadly serious business fact. Just talk with any business owner whose business is dying, and who’s on his way out the back door, and see how unhappy he is. Every day of the week for the past 3 years I’ve been heavily involved in helping people in this situation, so I know little about it.
If you want to avoid major, unnecessary cash flow dramas in your business it’s vital to take out the time to look at your current cash flow policies, and ensure that your accounts receivable system isn’t from the bronze age. It is YOUR MONEY after all!
If your business will be, or already is, running accounts and issuing invoices these 12 tips are an indispensable check-list for the health of your accounts receivable system.
12 Ways To Set Up A Powerful Accounts Receivable Policy
1. Put strong Terms and Conditions of Trade in place. These need to be clearly stated on all your quotes, credit application forms, agreements or contracts prior to commencing work or supplying goods.
2. Conduct a credit check on your potential new client before providing them with goods or services. You must understand who it is you’re extending credit to so you can set terms appropriate to that risk.
3. Keep informed of the credit worthiness of your existing client before extending more credit. Just because they passed a credit check 3 months ago doesn’t necessarily mean they are still a good financial risk.
4. Request business references, and actually contact them.
5. Be sure your Terms and Conditions allow you to pass on ALL debt recovery costs to your client.
6. Be sure your Terms and Conditions incorporate serious consequences for late payment, including things like penalty interest at 2.5% per month.
7. Send out your invoices the same day goods are shipped, not a week or two later.
8. Follow up on late payers promptly with phone calls and letters. Don’t waste time in endless discussions with late payers. If the money isn’t received when promised, have a collection agency in place to take the matter over for you so you can get back to business.
9. Empower your bookkeeper to chase your accounts by having a robust Terms Of Trade in place. This way your bookkeeper can refer the client to particular clauses that will be invoked if payment is not made.
10. Don’t continue to supply goods or provide services if bills remain unpaid, or if periodic payment arrangements aren’t being adhered to.
11. Bank cheques received immediately….. and don’t delay!
12. Negotiate with your bank to obtain funds availability of 0 to 2 days on cheques deposited. Don’t accept the general rule for the public from the bank that availability of cheque deposits is 1 to 5 days. Speak with your bank manager and enquire about its “availability schedule.” Insist on receiving fast availability of two days or less.
Don’t be an unsecured, interest-free, line of credit to your clients or customers any more!
Take control of your cash-flow by contacting your accountant or a credit management service and asking for a free invoice and quoting ’check-up.’ Even your bank manager can help you there. I find many business owners don’t recognise what a great asset and resource their bank manager can be to their business. Whatever you do in relation to overdue accounts – don’t do nothing.
If you’re from Australia and would like some help you can contact me by leaving a message in the box below. I can put you in touch with someone in your city or state who can help you.
Remember, if you take care of your business, your business will take care of you.
Copyright Gaye Crispin 2011
Gaye Crispin is a sales and marketing trainer, artist and writer. By the time Gaye was 25 years old she already owned 3 businesses, including a restaurant and a Solace Window Tinting Franchise.
In 1988 Gaye established a large telemarketing organization in Sydney, which was the first of its kind to market residential investment property to interstate investors over the phone. Her system was so successful and cost-effective that it quickly became the standard throughout the industry, and is still in use today.
She has successfully designed and implemented sales and marketing systems for motor vehicle accessories, art, skin care, health food, advertising, insolvency services, credit management systems, seminars and investment products.
Gaye has a debt collection and credit management agency, and is also the founder of Women On Top Business Planning, a group of individually successful business women who are passionate about helping business owners write powerful business or action plans for their business.