In times of rising interest rates and reduced consumer spending, it's important to have a clear, unequivocal credit policy when dealing with clients. If they don't pay in full and on time, then your business will suffer. In small business, cash flow is king.
In times of rising interest rates and reduced consumer spending, it's important to have a clear, unequivocal credit policy when dealing with clients. If they don't pay in full and on time, then your business will suffer. In small business, cash flow is king.
There are a number of things that you can do to ensure that you get paid on time:
1. Have a credit policy and communicate your terms and conditions when you transact with clients - if necessary, have your new client sign a written set of terms and conditions, as well as displaying your terms prominently on your invoices.
2. Run a credit check on all new clients - there are numerous credit check agencies that can determine whether your prospective new client is a bad payer.
3. Keep abreast of your clients' business health - keep your ear close to the ground so that you can find out early if your client is in financial trouble.
4. Follow up invoices - you should follow up your invoices a certain number of days after issue. Your follow-up procedure should be documented in your credit policy and it should be executed to the letter without exception.
5. Keep good records - without good records, you could find yourself in dispute with a client over an unpaid bill.
6. If you have lots of invoices, consider outsourcing your accounts receivable function - known as 'factoring'.
ACTION LIST
- Write a credit policy for your business
- Ensure that your policy is articulated to clients via invoices and agreed in written terms and conditions