The art of positive cashflow
Positive cashflow is integral to any business. It can mean the success or failure of your business and may hinge on whether your debtors pay you.
There is no one solution for maintaining a positive cashflow but there are a number of essential checks you can implement to keep your business in the black.
Top Ten Tips for Positive Cashflow
- Ensure your documentation (eg contracts, terms of trade, credit applications, terms and conditions) properly reflect your business policies.
- Train your staff in relation to your policies. Credit and sales departments are often seen as working towards different goals and targets. It is important to keep these two teams within your organisation in communication and working together. It is ineffective to sign up new clients if they do not pay you.
- Ensure customers properly complete your documentation and that you obtain and retain all documentation on file – you will need these to "prove" your debt.
- Obtain guarantees wherever possible.
- Conduct appropriate searches to verify customer details.
- Consider whether any security should be obtained eg a charge of real estate or other assets.
- Set credit or other trading limits where appropriate and monitor them closely.
- Maintain communications with your debtors so you know what they are doing and if there are any changes to their circumstances.
- Monitor any "warning signs" of financial trouble from your customers before they become debtors. These signs include:
Make a note of these "signs" in a central database or file for each customer.
- bounced cheques
- broken instalment arrangements
- non return of phone calls.
- Time is of the essence – act quickly to recover your debts. Remember that they key to positive cashflow is positive action!
For further information on ways to reduce your bad debtors, improve your cashflow and keep your business in the black, call us today.