Credit Control – Remove those barriers to getting paid

Are you taking your Credit Control seriously?

 

Why are so many companies failing to take credit control seriously? Perhaps it is because so many businesses are too timid towards late-paying customers.

Do you use any of the following reasons:

” They’re well established customers of ours; they do pay, even if it is always late.”

Or:

“They are a good customer of ours – we do a lot of business with them.”

Perhaps, and most alarmingly. you may use the most frequent reason for not enforcing your credit control:

“We don’t want to risk losing future orders by getting heavy with them over payment terms.”

So the real question is, do you honestly believe that allowing your customers to dictate payment terms to you, will ultimately help your business survival?

In reality, businesses trading styles and products differ widely, and therefore, so do staff in customer facing positions. They will want to establish good customer relationships. To many in the business, goods and services being provided shows a constant and reliable customer.

For us who work in credit control, the definition of a good customer is one who pays promptly within the previously agreed credit terms.

We know that you give credit to ensure greater profit for your business, but you need to ask what positive benefit there is for your business in allowing your customers credit terms on either thirty, forty-five, sixty or ninety days?

We believe that effective credit control starts at the customer acquisition and is part of good commercial awareness. It is the responsibility starts at he top, with the Managing Director, the Finance Director and the Sales Director who should all create the right message to cascade downwards to all employees.

To get credit control working properly the following key areas need to be covered:

  • Deciding what credit to give a customer – the risk profile of the company you are doing business with must be understood.
  • Set specific credit limits for a customer and impose them.
  • Chase debt when it is about to become due.
  • When working with large companies, understand their processes and procedures and adapt to ensure you yet paid.

For many companies, credit control is a task which no-one wants to undertake. For us, it is a vital part of ensuring a company survives and flourishes.

If you want to find out more about Credit Control or how Brookstand can help you, either fill in our contact form or call us.

You will find out more about Brookstand’s Credit Control services here.

 

 

 

 

 

Business Failure – avoid mistakes and deliver success in business

Let’s face it, business failure is not on our minds when we decide to start our business.  To be fair, there are enough siren voices around telling us that the time isn’t right to go it alone. They argue that we would be safer in a large business. People advise that we should be risk averse.

But we should be prepared to put these voices behind us.  Instead, we need to plan and nurture our ideas.  This will help us realise our dreams.

The Official Receiver lists the main reasons of business failure for SMEs (Small and Medium sized Enterprises) as follows:

  • Insufficient Turnover
  • Poor management and supervision
  • Lack of proper accounting
  • Competition
  • Not enough capital
  • Bad debts
  • Excessive remuneration to the owners

So how do you avoid falling into these traps?

Well having good planning, market research and systems in place will help alleviate these issues. By introducing these aspects you will help be a success in business and protect against business failure.

Getting prepared for business should force you to ask the fundamental question: “Do you have the abilities for starting and running your own bushiness?”

There is a common held belief that for every ten people who want to start their own business only one finally does so.  Business failure can be down to several reasons as we know, and apathy is another strong contender.

We suggest to prevent you falling into the business failure trap you look at your own abilities,  satisfy yourself there is a real need,  and check the viability of the market you are hoping to operate in.

Why not explore this further? Each of these areas can be tackled with guidance and the right support. Contact us to see if we can help.

 

Help your Cashflow by getting payments more efficiently

Payments are vital for the smooth running of your business. We strive to attract customers for our goods and services by dynamic sales and marketing activities. We pride ourselves on producing attractive offerings at prices that are affordable to our target market. We aim to deliver high quality goods and services to our customers which give them satisfaction, enhance our reputation and hopefully attract them back and/or refer us to their contacts.

So why do so many of us fail at ensuring we receive payments on time when we get around to invoicing for these goods and services? This can be so damaging for our cashflow – often a vital area for most small businesses.
Here are eight tips to help you receive the money you deserve when you expect it:

1. Before you supply goods, make sure the customer has agreed to your terms in writing.

This will mean there are no crossed wires. We won’t have the situation that the sales rep thinks they have agreed to payments within 30 days, but the customer thinks it is due 30 days from the end of the month following delivery!
Make sure you spell out the terms when you confirm the deal and not after the goods have been delivered.

2. If You Supply Goods Make Sure You Get A Signed Delivery Note.

By getting a signature from your customer it gives you confidence that they have accepted the product and if they also sign that it was delivered in a satisfactory condition they cannot use the excuse of faulty goods to delay payments.
Also make sure the signature is dated.

3. Raise The Invoice And Send It As Soon As You Can After Delivery Of The Goods Or Services. Ideally, Ship Them Both at the Same Time.

Remember until an invoice is raised, your customer can’t do anything with it!
The payments process will only start once your invoice has been raised and received by your customer.
Ask yourself could you get your suppliers to pay in advance?
Never fall into the trap if raising invoices monthly.
4. Seven Days After the Invoice Has Been Dispatched, Ring Your Customer to Make Certain That There Are No Problems and That the Invoice Has Been Passed To Accounts for Payment

By calling to ask how things are, it gives you the opportunity to quickly sort out any problems that have arisen and still be paid on time.
This will also have the added benefit of establishing if there are issues with other areas of your organisation such as despatch or sales where customer expectations are not being met.
The results will be happier customers who will buy more from you; greater sales which will result in more cash flowing through the business and potentially your profits will also increase.

5. Always Send Out Statements to All Outstanding Accounts

Many companies only make payments on statements – usually the ones where their purchase ledger is a mess!
If so play by their rules and keep building your the relationship with them to get payment quicker.

6. Seven days after the due date, phone the debtor and explain that legal action will be taken if payments are not made

Make this call!
Remind your customer of your terms of trading to which they agreed and warn them if payment doesn’t come within seven days, you won’t be able to stop the commencement of legal action.

7. Seven Days After That, Fill Out a Writ on a Money Claims Form and Fax It Over, With a Note Saying That If Payments Are Not Received With 14 Days, This Form Will Be Filed With the Small Claims Court

Now your customer will more than likely react straight away and remember all you are doing is nothing more than sticking to your agreed terms of trade and showing you intend to get paid for your invoices.
You don’t have to use a solicitor or go to court to do this.

8. If no payment is made, file the writ

You must file the writ if there is no payment
You can do this on line
If there are still no payments – take it out of your cash flow – write it off! You don’t want to pay tax on income you have not received!

Eight Steps to Good Financial Management of Your Business

Are you really on top of your business’s financial management?

Surely one of the major jobs as a business owner is to ensure that your business keeps on course and out of trouble to achieve your financial objectives. With strong financial management in place, a company can confidently build its business and weather the storms when they arise.  Without it, businesses become vulnerable to attacks on it from general business conditions, the wrong decisions and unscrupulous employees or business partners.

So here are eight objectives you must set yourself to ensure that the finances of your business are in order:

  1. Money for starting your business

You need to make sure you have the right amount of money to start your business; you need to have the cash to get the right assets in place to get your business off the ground.  A great idea needs to be realised and the monetary requirements understood.  Get this clear at the start and you can build the business with confidence. Your business plan needs to be clear how much and when you require this starting capital.

  1. Making a profit

Sounds ideal – but the best companies make adequate profits on a consistent and predictable basis. With this, businesses are in control and can plan for the future.  You need to be confident that you have strong business cases for your ventures and that you know when and how much profit you will make.  A strong business case and a good budget and forecasting system will allow you to measure your performance.

  1. Controlling the cash

We believe that good business manage their cash from profits in such a way that they can keep all their options open.  Remember a sale is not a sale until you have a satisfied fully paid up customer willing to buy more and/ or recommend you!  You need to keep a constant eye on your debtors and their ability to pay you.  Have a good invoice and credit control system in place and remember to control how you pay your creditors!

  1. Minimise threats of fraud and other losses

Watch out for the bad guys! – they could be poor payers, fraudsters, either internal or external – not everyone is as honest as you, and you need to have systems and controls in place to highlight issues and act fast when you see them. Control of your business assets means that you do not generate waste and there is leakage of the profit you business should be earning.

  1. Be tax efficient

You need to do this for the business, its owners and it employees – this is not about evasion but efficiency and there is nothing wrong with this objective.

  1. Understanding the cash needs of your business

You may have great plans ahead, but if you don’t have the cash in place to realise them they are merely dreams. Understand what cash you need for your ventures and how that fits in with your business patterns. A strong understanding of the cash low of your business will prevent you getting into difficulty by overspending at the wrong time, and ensuring that you know when is the best time to move your business forward.

  1. Keep in good shape and out of trouble

We mean your financial condition here – good cash position, good customers and reliable suppliers and protect your business assets! Always question have I got the right customers and the right products and services to maximise profits and can I improve contracts and services I receive from my suppliers?

  1. Know what you are worth!

So how do you know what price you are worth if someone wanted to buy your business! What value is your business at the present

Well, do you have the basic skills and knowledge for the financial management of your business?

 

Cash Management – the lifeblood of your business

Cash – Vital for your business
Cash flow is the life blood of all businesses and is the primary indicator of business health. It is generally acknowledged as the single most pressing concern of most small and medium-sized enterprises (SMEs), although even finance directors of the largest organisations emphasise the importance of cash, and cash flow modelling is a fundamental part of any private equity buy-out.

Look after it and it will look after you
In a credit crunch environment, where access to liquidity is restricted, cash management becomes critical to survival. In its simplest form, cash flow is the movement of money in and out of your business. It is not profit and loss, although trading clearly has an effect on cash flow. The effect of cash flow is real, immediate and, if mismanaged, totally unforgiving. Cash needs to be monitored, protected, controlled and put to work.

Four principles of cash management

  1. Cash is not given. It is not the passive, inevitable outcome of your business endeavours. It does not arrive in your bank account willingly. Rather it has to be tracked, chased and captured. You need to control the process and there is always scope for improvement.
  2. Cash management is as much an integral part of your business cycle as, for example, making and shipping widgets or preparing and providing detailed consultancy services.
  3. Good cash flow management requires information. For example, you need immediate access to data on:
    1. your customers’ creditworthiness
    2. your customers’ current track record on payments
    3. outstanding receipts
    4. your suppliers’ payment terms
    5. short-term cash demands
    6. short-term surpluses
    7. investment options
    8. current debt capacity and maturity of facilities
    9. longer-term projections.
  4. You must be masterful. Managing cash flow is a skill and only a firm grip on the cash conversion process will yield results.

Make a competitive difference

Professional cash management in business is not, unfortunately, always the norm. For example, a survey conducted by the Better Practice Payment Group in 2006 highlighted that one in three companies do not confirm their credit terms in writing with customers. And many finance functions do not maintain an accurate cash flow forecast.

Good cash management has a double benefit: it can help you to avoid the debilitating downside of cash crises; and it can grant you a commercial edge in all your transactions. For example, companies able to aggressively manage their inventory may require less working capital and be able to extend more competitive credit terms than their rivals.