Financial Control – How to get paid on time – 10 top tips for SMEs
Editors Note: Expert content needs an expert content writer and Yorkshire Powerhouse is pleased to publish this business advice article on business taxation, kindly written by a real expert in his field – Martin Manning of YRH Finance Team.
Please consider contacting Martin for help and advice in taking better financial control, profit improvement and dealing with financial stress in your business – just click on the advert links above or below – and please mention Yorkshire Powerhouse if you do make contact.
Getting paid, on time, by your customers should be the norm but yet for many SMEs, it can be one of their biggest challenges and one of their greatest financial stresses.
“But I don’t want to lose my clients’ business. Chasing to be paid may hurt my relationship with them and my business will suffer…”
This is a common theme we often hear from business owners. But getting paid on time is not mutually exclusive to building a really strong relationship with really good customers – it’s good, common, business practice.
The key to reducing the risk of bad debt and good credit control is to always have a robust process in place. This is where the expertise of an experienced Finance Manager can benefit growing SMEs. By implementing best practice credit control processes and ensuring the discipline to follow the process is embedded in the team, it is relatively easy to reduce the risk of bad debt and improve cash flow.
10 top tips to get paid on time
- Carry out credit checks on your customers before you sell to them. Give yourself the opportunity to not give credit, amend your terms and reduce your business risk.
- Make chasing money owed to you the first job of the day, every day.
- Have one person with responsibility for systematically calling all your customers every day and getting confirmation of payment dates.
- Call customers 10 days after sending them an invoice, even if your terms are 30 days. It’s a ‘customer care call’ rather than a chasing call, but it means you can sort the two reasons that account for 90% of late payments and still get paid on time – the customer needs a copy of the invoice or has a query.
- Get a daily (preferably) or weekly (at least) update on who owes you money and stay on top of it.
- Send statements every two weeks. Recognise that many larger companies need these in order to make a payment to you – and won’t pay unless they have this AND receive a call from you.
- Resort to “normal recourse” and escalate collection. No one wants to go legal, but you need to protect yourself and follow the normal process to make sure you do get prioritised.
- Sometimes it’s the right thing to do to agree to a payment plan.
- Never let the debt get bigger. If someone hasn’t paid you, don’t give them any more on account – you’re not helping them and you’re just taking on more risk.
- Don’t give up, don’t leave it and keep asking to get paid. Be firm, be polite, be clear and follow through.
And just in case you still have any doubts, it is never okay to buy services and goods and not pay for them.
If you are looking to take ‘proper financial control’ of your growing business then we strongly recommend taking professional advice. Don’t try to deal with the essential aspect of your business alone – you need specific skills and knowledge to get things right!
Advice on taking financial control of your business from Yorkshire Powerhouse
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