Cash flow is very important to a buisness and is often something that can be difficult to manage, especially when your business exapnds rapidly. Here are several areas where your business could improve its procedures and reduce the risk of you cash flow becoming a problem – or to make changes if it is already an issue for your company.
There are always going to be people and companies who take longer to pay a bill than others, but if you can check their credit history before you start doing business with them the better position you wil be in. If you know that you are dealing with a company who has a past of avoiding paying their bills or are in trouble financially and so are unlikely to be able to pay your bills in the future then you can start off by negotiating their payment terms – perhaps asking them to pay half up front before work commences, so that you don’t lose out too much if something goes wrong.
Making sure that you keep track of who owes you and how much means that you will be in a position to send invoices to clients as soon as the work has been completed.
Having a member of staff in house who chases late invoices and handles all credit control situations can be a massive help to improving your cash flow. Not only will you see an increase in speed of people paying, rather than them being left to do it in their own time, but it means that you can keep up the level of engagement and continue to build relationships with your customers, rather than having an outsourced company do it for you.
Making sure that the invoices that you send out are compliant with tax laws (especially VAT for international invoices) means that your invoices will not be rejected and there should be no delay in them being paid. Also,it is crucial that you know the rate of VAT that you should be charging your clients if you trade cross -border – depending on whether you are VAT registered you may have to charge your clients local VAT .
While your business may have suppliers that it has a short term or temporary contract with, it is also likely that there are some companies/suppliers that you have long term arrangements with and so are in a position to negotiate the terms of payment that you have with them. This might mean lengthening your terms of payment from 30 days after the invoice is issued to 60 days.You are most likely to find that they are more than happy to have a conversation about lengthening the number of days they expect payments in – they would much rather receive a payment on time at an agreed later date than have an unexpected late payment because they can then factor it into their own accounts.
About the Author: Mallory Wood is Digital Marketing Manager at Accordance – one of the UK’s leading International VAT consultancy firms. Accordance was founded in response to Europe’s rapidly changing VAT situation with the aim to simplify the experience of cross-border VAT for businesses trading in Europe through a policy of practical engagement with clients and their indirect tax issues.