without a reliable process for tracking and collecting payments will eventually find it difficult to turn their revenues and profits into cash flow. One in four businesses fail because of interruptions to cash flow. Don’t allow yourself to be included in the statistics of failed businesses by following these simple tips:
Do Not Expect Prompt Payments
It is important to know what the payment terms are when you start a business relationship with a new client, particularly with a large corporation. If you are a supplier for a large company, take a look into their payment terms. Some companies have payment terms that extend 90 to 120 days. You should assess if you can afford to finance your business while waiting for the payments over this period.
Understand The Paperwork
A good understanding of paperwork and accurate invoicing can place you in a good position to receive on-time payments from your clients. Companies may refrain from payments if they manage to find any excuse that will allow them to do so. You can avoid this if you get your papers in good order. Ensure that invoices arrive on time and are stamped with accurate dates when the goods are dispatched.
Forecast The Cash Flow
It will be risky to run your business without a clear and detailed cash flow forecast. It is like driving a car in the rain without windscreen wipers: you can do it but you do not have any idea where you are going. You will be ahead of the game if you are aware of every completed transaction and each of your records are updated accordingly. See to it that you also track those one-off and irregular payments.
Investigate The Cause Of Your Cash Flow Problem
Late payments are often times the result of bad financial practices. A range of other problems such as inaccurate invoicing, inconsistent pricing and misunderstanding of your customer’s processes can all contribute to a poor payment infrastructure.
Invest In Professional Accounting
Many small businesses rely on a basic knowledge of accounting but there is more to accounting than just collecting invoices and keeping the bank statements. Good accounting is crucial to good cash flow management.
Our accounting experts here at ORT Consulting can work hand in hand with you so you can easily track your finances and implement a better structure that can guard your business against cash flow interruptions.
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