Did you know that around 80 percent of businesses fail due to cash flow problems? The big challenge for any business is when cash flow issues creep up unnoticed. So, how can businesses bring in cash while stabilising their cash flow?
Senior Client Managers at Coutts Redington, Andrew Towers & Amanda Pickers, both say it’s important for business owners to understand their risks and take the necessary steps to manage cash flow before it becomes a large issue.
“Cash flow has nothing to do with profit, but rather the amount of cash available to your business. It is the difference between the cash paid out and the cash received,” explains Andrew.
“If you only start addressing cash flow issues when the situation is already an emergency, it is often too late.”
Amanda says there are many steps business owners can take to prevent poor cash flow, including automating invoices and communicating openly with new clients about the payment expectation.
“With software today, businesses can now automate email reminders for overdue invoices and statements. This means collecting payments can be largely automated, saving business owners valued time and money,” says Amanda.
“When engaging with a new customer or client, it’s a great idea to start instilling good payment habits early on in your working relationship. It is important to have clearly communicated when payment will be expected, when they will receive invoices and the payment terms that apply.”
Andrew adds that prioritising the largest outstanding invoices is also of great importance, while documenting any conversations in writing can further assist in preventing additional issues from arising in the future.
“If you’ve sent automatic reminders and statements and still have outstanding invoices, be sure to prioritise the biggest or oldest amounts – not the ones at the top of an alphabetical list,” continues Andrew.
“It is also critical to follow up your phone calls with a reminder email, clearly stating the outstanding amount and details of the conversation. This will keep a consistent record of all your communication and make it easier to restart the conversation later, if necessary.”
Amanda agrees and encourages business owners to not be afraid of walking away from clients who consistently have outstanding invoices.
“At the end of the day, following up on payments takes valuable time and prevents you from growing the business,” says Amanda.
“As a business owner, it is crucial to be aware of the red flags and always make the safety and stability of your business the number one priority.”
