Cash really is King…
Last week we held a breakfast seminar covering the topic “Taking your Business to the next level” with Cos Bookkeeping and Ralli Solicitors, our presentation was based on no matter how good or profitable a business is, without a good cash flow it is set to fail and this article covers how you can make the most of your cash flow and the slight changes that can make a big difference taking your business to the next level.
There are many ways you can protect your business from bad debt, for example having a credit policy allows the departments within your business to understand the values of your business. The policy will set a way of doing things for your employees meaning they can provide consistent customer care.
It is important to know your customers and their business, a simple google search could tell you about a new customer’s reputation. For limited companies, a quick search at www.companieshouse.co.uk can tell you if the company is still trading and address details. Credit reports are also an important resource which can be used to tailor the credit limit and terms that you offer to your customer.
Setting credit limits allows you to cap the amount of potential loss that can be made. You may decide to increase or decrease the customer’s credit limit depending on their payment history.
Payment terms also allow you to determine your cash flow depending if you would prefer payment cash in advance, cash on delivery or a deferred payment period. The cost of bad debt is higher than the cost of the debt written off. Time to recoup bad debt, legal fees and stock lost all contribute to the additional cost of bad debt.
Always carry out ongoing checks on your customers, this allows your business to adapt to the changing climate, so you can avoid being stung by an avoidable bad debt.