The most important task for any business is making sure that they get paid for their work. Here are some top tips from STEVE MITCHELL of accountancy firm AAB on how to ensure that the cash flows in.
1. GET YOUR INVOICE IN QUICKLY
It’s easy to forget to invoice clients in a timely fashion, but it inevitably will lead to a delay in the ultimate payment date. So be prompt and don’t let things slip. This can be a particular issue if you’re an owner-manager, who gets bogged down in the day-to-day work.
2. USE TECHNOLOGY
If you invoice electronically, use software which allows you to see whether your client has opened and viewed your invoice. It’s a great way of keeping on top of payments.
3. SUBMIT THE RIGHT DOCUMENTATION
Make sure you reference the relevant purchase orders and, if applicable, customer approved timesheets, as there’s then much less wriggle room for your customer. And less chance they’ll tell you to go back and resubmit your invoice. You can even attach your paperwork to the invoice in a cloud platform such as Xero and ask your client to approve it.
4. INTRODUCE PROPER CREDIT CONTROL
If your customers haven’t paid you within the time you stipulated – usually 30 days – then you need to know and be prepared to follow up.
5. BE CONFIDENT
Some businesses are reluctant to chase an invoice because of the potential repercussions and effects on the relationship. But how good can that relationship really be if you’re not actually getting paid?
6. PUT SOMEONE IN CHARGE
Businesses which get paid promptly are often those with dedicated staff responsible for chasing debts. As soon as your company reaches a size to justify it, you may well find that the investment in staff makes a real difference.
7. CONSIDER INVOICE DISCOUNTING FACILITIES
These are not right for everybody, so consult your accountant, but there are options out there in which funders may agree to pay you, say, 85% of the debt you’re owed. Banks prefer these types of facilities to overdrafts as they have security over the debtors. Some funders provide integration with platforms, such as Xero, which make it easier to administer.