Managing cash flow is probably one of the most important issues when running your own business.
Before you start any work with any customer / client (new or existing) it is important to ensure that you have confirmation of the terms agreed and confirmation from your customer / client.
This might sound obvious, but without sending out your invoices, you won’t get paid. If you have a one off project for a client, you may wish to invoice at the end of the project. If it’s an ongoing piece of work then you could invoice at the end of the month for the work done during that month. Essentially, the quicker the invoice goes to the client, the quicker they will pay.
Make sure that your invoices are easy to understand – add the date, the date payment required (or terms), bank details and an outline of the work carried out.
If you use an accounting package such as QuickBooks, Xero or Freeagent, you can raise your invoices through the software package making your invoices look even more professional. These software packages will also keep track of who has paid and who hasn’t. We have set up an automated reminder using our accounts package so that if a client hasn’t paid after the terms, an email is sent to remind them of the outstanding invoice.
Consider offering clients a small discount for prompt payment. If you normally have a 30-day term, offer a discount if they pay within 14 days of the date of the invoice.
But what do you do if you don’t get paid?
This can be difficult if you are a business owner and it’s just you wearing every hat. You can create a great relationship with your clients but asking for money owed is never easy. Send emails following up payment so that you have a record – also try to call the debtor. It maybe that your emails are getting caught in the junk folders. If you still feel uncomfortable, try getting an independent third party to step in as they have no connection or working relationship to the debtor in question.
If you’re still up against tricky customers, you can consider getting legal advice and going through the small claims court or Money Claims Online – this is the same service but all done online and therefore is a cheaper option.
The issue of money is never an easy discussion to have with anyone but if you set your ground rules from the start and follow them through then you shouldn’t hit any problems with late (or even non) payers.
If you would like to speak to us about looking after your debtors, please get in touch!