Top tips to make sure the cash keeps flowing

WITH late payers continuing to make life difficult for small and medium-sized businesses, the Southern Society of Chartered Accountants has come up with ten tips to keep the money flowing.

Clive Rusden, deputy president of SOSCA, which has members in south Wiltshire, Hampshire and Dorset, said: “Late payment legislation hasn’t curbed the culture of late payments to suppliers.

“But this doesn’t mean small businesses are powerless in the face of the organisations they sell to.

“Small businesses must be ready to negotiate terms when they receive an order, particularly from new customers.”

The society’s ten tips are:

• Understand the customer’s payment terms: where invoices should be sent, what references or order numbers should be quoted, and whether the customer only accepts electronic invoicing.

• Have effective internal procedures in place: what level of credit checking is required and how frequently credit limits are reviewed.

• Make credit terms clear: If there is a difference between your payment terms and theirs, don’t ignore the issue, negotiate.

• Make sure sales invoices meet the customer’s requirements, send invoices as soon as possible to the correct address and department, ensuring they comply with requirements for VAT invoices, and follow progress.

• Make notes of telephone calls regarding customer payments, including dates and times of conversations, to whom you spoke and the outcome, and take action quickly.

• Move problems up so senior staff are involved sooner rather than later, particularly at the first signs of a debt going bad or if there are implications for other invoices. Establish a policy on how long an invoice is allowed to be outstanding before resorting to debt collection and when supply of goods or services should be stopped.

• Regularly review the debtors’ ledger for customers behind with payment. Get sales staff to visit these customers to seek information and set targets for credit collection.

• Employ professional credit staff.

• Carefully consider potential orders with longer payment terms. Consider the implications for profitability, cashflow, financing and bad debts.

• Consider factoring or invoice discounting to help manage cash flow.

• THE search is on to find the UK’s top recession-busting franchisees, following the launch of the Franchisee of the Year Awards.

The awards honour franchisees whose businesses have out-performed competitors and demonstrated success in challenging times - the theme for this year’s awards.

Entry forms can be downloaded from the bfa website www.thebfa.org and the closing date is June 26.

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