Cash Flow Was Positive But Spent More Than Cash Flow How Would You Like To Improve Your Cash Flow?

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How Would You Like To Improve Your Cash Flow?

It is said that “cash flow” is the most important word in business. Many businesses hit the wall because their cash flow wasn’t what it should have been.

In short, cash flow is the lifeblood of a business. You need CASH to pay staff, suppliers, bills, taxes. Without “cash” you can’t do any of the above. It also has a knock-on effect because as a result your staff can’t pay their rent, your suppliers can’t pay their suppliers… and it’s just a vicious cycle that will end with you being liquidated and ‘forced’ to pay.

Credit control

How can you avoid this and get the money you are owed? Well, installing a good credit control system will help. You take no prisoners the moment someone breaches their credit terms. The account is suspended until the money has arrived. In fact, if we take it a step further – no one gets credit! They pay on account or cash on delivery. This eliminates all the chasing junk. And common pronunciation, e.g. that there is no one here to sign a check, or “cheques in the mail” or anything like that. And that’s nonsense.

The price

Remember – money owed to you that is not in your bank account is money that is working hard for someone else in their business. Not for you. And the money you will have to spend [more] money to collect! Every letter, phone call, email and statement is wasted energy.

The Law on Default Interest

Make sure you use the Late Payment of Commercial Debts (Interest) Act 1998 to collect interest on overdue amounts.

Take slow payments seriously. And if it really gets out of control, make sure you engage either a professional debt collection agency/collection agent or have a credit control person who follows a certain process and the debt is passed on to one of these bodies within 90-120 days. Don’t let these things go unchallenged.

Tactics

Many unscrupulous businessmen use smaller companies to “lift” their business. They use the products and services of the smaller guys and have no intention of paying anyone. They know that many people will write off these ‘small’ amounts. They will order and order until you stop them. They will pester you and promise to pay, then find a mistake on the bill, then find a mistake on the merchandise (which they were happy to use, mind you, and would have ordered more if you hadn’t stopped them).

The answer

So, there’s really only one solution. Stand your ground and take them to court. It’s amazing how willing people are to reach an amicable agreement when they see you mean business. And remember, this is a business and it’s your livelihood. A non-paying customer is not a ‘customer’ but a THIEF!

The usual suspects

I’ve been in a lot of small businesses, in their sales book department – and I’ve seen these tactics used. And always the same tired excuses. And I’m lucky to have this experience to look back on, to know that these are just excuses. And I started to develop a sixth sense for people who just don’t want to pay.

Say it

On the other hand – if you are in their Purchase Ledger Department, then you will be a dodger. Never picks up the phone, never returns calls, always ‘promises’ to pay but never does. And in the vast majority of cases, it’s just because that company doesn’t have the money to pay and therefore avoids the supplier, hoping to buy some time or simply be written off.

Keep up with the books

If necessary, hire a part-time bookkeeper to come in and do the books for you and chase your slow customers and keep an eye on your cash flow. When you follow them, you show them that you are in their way. And you’re more likely to get paid before the person who isn’t chasing them because they’re behind and haven’t even gotten their bills yet!

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