Keep business cash flowing
Firstly keeping business cash flowing is the most important financial commodity that keeps the business wheels rolling. Secondly cash is the life-blood of any business and is vital for survival, sustainability, investment and growth. As a result cash is needed for a whole variety of things, from paying staff, suppliers and bills, buying equipment, servicing loans and paying taxes.
Three things to remember to help keep that business cash flow moving is summed up as PIC
Make sure you have a robust, practical and effective credit control policy. This should include who and how you grant credit facilities to, your payment terms, and how you deal with late payments.
Clarify your terms and conditions to your customers at the outset. Likewise treat it as part and parcel of an agreed way of working.
In the same vein, know who owes you money, when the customer should be paying and when it is overdue. Similarly you need to monitor cash flow, and ideally prepare a forecast cash statement on a rolling twelve-month basis. Most importantly your cash flow forecast should show you by month:
- WHEN cash comes in and WHEN cash goes out
- Surpluses or shortfalls of cash
Cloud based accounting packages like Xero, will:
- Keep track of how much money is owed and when payments are due
- Produce a variety of customer reports, showing things like what invoices are outstanding, how long they have been outstanding for and sales by customer
- Give you and your business up-to-date and current financial information on profitability and cash flow
- Keep accurate up-to-date records of every invoice and transaction
To sum up, keeping the business cash flowing is important and managing the credit you give customers is critical.
- Keep on top of late payments, and don’t let things slide.
- Send reminder invoices promptly and follow up with a phone call if needed.
- Set reminders to be sent out at the intervals that you require
- Add notes to a customer account e.g. if they’ve requested a payment plan and the amount, they have agreed to pay
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