In the present financial crisis there will be very few businesses who will not be finding things difficult. The most important area that business owners and managers should be concentrating on is cash flow and the following are a few elements to look at where managing cash flow is concerned:

Credit Control – no sales transaction is complete until you have been paid for the goods or services you have supplied. If your customers are not paying you within the agreed timescale, be that monthly or whatever, then it’s time to call in these outstanding payments. Make sure you remind customers a few days before payment is due. Whilst a letter or email could do I personally favour a quick telephone call along the lines of “Payment for our invoice 123456 is due next week, can you confirm that you have no queries and that we can expect payment on time?”

If you don’t receive the payment then wait a day or two to allow for genuine postal delays – these do happen – and follow up with another call. Be polite but firm and don’t be fobbed off with excuses. Remember, other suppliers will also be chasing payment and if your client is short of cash they will get paid first.

If you don’t get paid fairly soon then consider sending a letter warning the customer that you will be passing the debt to a debt collection agency. This usually does the trick. Don’t worry too much about upsetting the customer as you really don’t need sales – which will involve you in costs anyway – to customers who can’t or won’t pay you.

Invoicing – Make sure you send your invoices out on time otherwise you will seriously affect your cash flow. Also state clearly on your invoice what your payment terms are. For example if you just put “monthly” or “30 days” do you mean one month or 30 days from the date of the invoice or the date of supply?

Factoring or Invoice Discounting – Invoice discounting can be a way of drawing money against your invoices. Your business will still remain in control over the administration of your sales ledger but it could provide a cost-effective way for you to improve your cash flow.  Alternatively, a factoring package could provide you with the working capital and positive cash flow you need for your business to flourish. There are several different suppliers who can tailor a package to your exact needs and if you contact us we can put you in touch with some.

Sale and Leaseback – If you have capital equipment such as production machines on which there is no finance you may be able to sell these to a finance company who will lease them back to you thus releasing working capital. Again contact us for introductions.

Cost Audit – There are several companies who will audit your electricity, telephone, insurance and similar costs and try and find you better deals. They work on the basis that you pay them a proportion of the savings they identify so you have nothing to lose in having them look at your situation. Again we can introduce you to such companies.

3 Responses to “How To Survive The Credit Crunch”

  1. James Green says:

    Glad you found it useful. Thanks for making the comment.

  2. PaulW says:

    This is very useful indeed. Thank you for making this post.


  1. How important is your reputation? | Whooah Biz - January 13, 2009

    […] is a great post over at Link4business http://link4business.info/2008/11/how-to-survive-the-credit-crunch. About how to deal with the payment of invoices on time. As the excerpt below […]

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