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Long term tips to cure your businesses biggest headache

4 'quick fix' tips to cure your businesses biggest headache

Lacking cash?

Four Long term tips to cure your biggest business headache.

1. Release cash from unpaid invoices with a 'Factoring' service.

Factoring is an increasingly popular way of getting cash quickly - it allows you to 'sell' your invoices to a specialist company in exchange for advance payments.

Positives:
Releases money owed to you quickly - sometimes up to 90 percent of invoices within 24 hours, the rest will come later.
Saves time - eliminates internal invoice ledger management, (factoring companies provide a full service including monthly statements).
You can 'trial' it - many factors now offer trials, allowing you to decide if it's a suitable solution for your company.
Negatives:
It isn't free - there is a fee associated with this service. Find out more and get a factoring quote.

2. Avoid late paying customers

Do your research - before you bring on a new customer make sure you are versed in their history of reliability. Equifax, Dun and Bradstreet and Experian are UK leading credit reporting agencies who have in-depth, up to date data on UK companies' financial and operational activities.
Look them up and perform due diligence on your potential customer and, if possible, ask those already working with this customer what they're like.

Positives:
It's prevention - not just a cure. Your cash flow problems are likely to diminish rapidly if your clients are diligent payers.
Negatives:
Not everyone has the luxury of 'knocking back' potential customers - to get kick-started some business need any customers they can get.
How do you know you are not making a mistake? Information on serial late payers is publicly available although its accuracy is not proven.

3. Renegotiate contracts with your customers

In Four ways to fix your firm's short term cashflow crisis, we discussed offering clients a discount in return for prompt (i.e. within 7 days) payment.
If you'e forced to do this month in, month out, you're likely to have an admin nightmare, not to mention the fact that you're encouraging clients to consistently hold off payments until they receive the 'we really need you to pay us' call.
An effective way to tackle this long term is to write in 'early payment benefits' into contracts. For example:
'If you pay your invoice within 7 days of issue you'll be entitled to a 5 percent reduction on the invoice. If payment comes after 7 days of issue, full payment is required.'

Positives:
You'll encourage customers to pay you promptly each month.
Time chasing customers for payment is likely to be slashed.
Negatives:
It will cost you - imagine if all your customers take advantage of a '5 percent discount'?
What happens if your customers choose not to take advantage of the discount? You'll be stuck chasing them all for payment again.

4. Bill promptly

It sounds obvious but it will have an impact. If you get your invoices out the door as soon as possible you're giving yourself the best possible chance of collecting payments sooner rather than later.

Positives:
It's free.
Negatives:
Not a guaranteed solution - you're still likely to have to chase customers for payment.
Doesn't put you in control - your customers still dictate when you get paid.
You may find yourself putting off 'high-priority' tasks just so you can send your invoices out by a certain date.

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