Any small business owner will tell you that cash is king. But what does that mean in practical terms? Put simply, businesses go bust in the long term through lack of profit, but in the short term, they fail because they don't have enough cash to pay their bills.
As the life supply of a business, managing cash flow effectively is critical for success. The key to keeping cash flow fit and strong is ensuring there is a careful balance of funds coming into and out of the business so that you can pay suppliers and invest in new ventures.
The issue of late payments is exacerbating the cash flow challenge for small and medium sized businesses. In this article, I will give my five top tips to help you take control and streamline your firm’s cash flow:
- Know your customers like the back of your hand
- Always be prepared
Step one here is making sure you have credit insurance in place, in case a customer does not pay. Insurance companies and brokers offer tailored credit insurance to help protect against non-payment by customers. Get an understanding of whether your customers are at risk of failure and be sure to consider the business impact of late payments, especially by your most important customers. Don’t let other business’s failures be a barrier to your success.
- Agree your payment schedule
- Save time and simplify chasing
Embracing technology which automates and simplifies your credit management can save your business precious hours in back office administration, freeing up your time and money to focus on putting more value into your business.
- Play fair with your suppliers
By Mark Duncan, product manager, Sage UK