By asking themselves these five simple questions, small businesses can keep their cashflow healthy:
1. Do we have the right processes in place for chasing invoices?
Chasing invoices is about a process – SMEs will need to get the process right and make sure they follow it. Generally we would advise a business to email and post invoices (and make sure the invoices are correct!) then follow up with a call.
2. Have we tried to build good relationships with our customers’ finance departments?
It is important to build a relationship with the customer’s finance department and make notes of any nuggets of information they give away. SMEs will soon start to see who the good payers are and what excuses are made for late payments.
3. How long has it been since we re-visited our cashflow projections?
SMEs should think about re-visiting their current cashflow projections with a ‘worst case scenario’ in mind, so that they can see exactly what impact late payers are likely to have on the business – and then plan accordingly.
4. Do we credit check potential customers?
SMEs must make sure to credit check their customers in advance and don’t let big arrears build up. A good relationship with the client’s finance teams will give the firm a gut feel regarding potential problems.
5. Should we be outsourcing to an Invoice Finance company?
Outsourcing to an Invoice Financing company will mean that they can advance money against the SMEs invoices, thereby helping cashflow. They can also chase up and collect the invoices for the firm, should the business not have the resources or expertise to do so.
Whether SMEs choose to use invoice finance or another approach to manage cashflow, they will need to take a structured approach to credit control and management. Given the current state of the economy, SMEs shouldn’t be afraid to seek out some assistance here, since a little help in this area can often go a very long way.”
