“Insanity – Doing the same thing repeatedly and expecting a different result” – Albert Einstein
Cash flow can be a big challenge for any business. Does the following scenarios sound familiar in your business?
You experience challenges with the cash flow of your business monthly due to:
- Customers don’t always pay on time;
- Suppliers can have unexpected payment demands;
- You dread doing the necessary administration and put if off on a regular basis.
We recommend you review your cash flow system regularly to ensure it is up to date and effective in realising revenue quickly and efficiently.
Optimising the cash flow of your business requires attention to the following:
- Accounting software:
- Use easy-to-use online accounting software
- Xero is such accounting software that makes it simple for you to invoice your customers and get paid faster.
- Provide your quotes electronically to your customers.
- Once the customer accepts a quote an invoice should automatically be generated.
- Create professional invoices. Use standard templates and customise it to suit your business needs.
- Send your invoices electronically. The faster you send out your invoices the sooner you are likely to get paid.
- Sending invoices electronically saves time and money compared to conventional invoicing methods.
- Make sure your customer is expecting your invoice. If it comes out of nowhere they may be slow to approve or even be annoyed.
- Use e-mail reminders to automatically chase payments for submitted invoices.
- Accept payment
- Ensure your accounts receivable process is effective:
- Don’t accept all new customers
- Run a credit check to inspect if they are regarded a good-payers; and or
- Call someone who supplies them, and ask if they get paid on time.
- Put your payment terms in writing
- When you will bill your customers;
- How long your customers have to pay;
- Consequences for late payment – i.e. interest, admin. fees and legal charges;
- Avoid misunderstandings
- Get your payment terms signed off before you start any work for your customers
- Ensure you invoice as per your agreed terms. Don’t create delays from your side.
- Plan for customers paying late
- When will you e-mail a reminder or give them a call?
- When will you send a “past due invoice” or a statement of account?
- When will you involve a debt collector?
- Use online payment options
- Add to the options available for your customers to pay you faster by adding online payment options such as debit/credit card, direct debits and other online payment options such as Yoco/PayPal that integrate with your online accounting software.
Don’t be insane – make the change.
Contact us to review your systems and make the necessary recommendations:
Paul Botha (Johannesburg) Reinier Duraan (Cape Town)
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)