For small businesses, the internet has proved to be a great levelling ground, making winning custom less about size and brand power, and more about simply topping the search results.
But as more people prefer to pay remotely for goods and services, are small businesses at risk of losing custom - or worse, going unpaid for work done - due to their lack of good electronic payments technology?
Sometimes, businesses fail. If a failed company is a customer of yours it can be an expensive and potentially disastrous situation.
In most cases their will be little you can do, except wait and see if any money is left for creditors when the affairs of the company are formally finalised.
At some point in the life of every business they will face difficulties in getting a client to settle an invoice.
Now you are faced with the very real prospect that this unpaid invoice may become a bad debt and bad debts can cripple an otherwise profitable venture.
Cashflow is the very lifeblood of your business, if it runs low a business will struggle to continue. If it runs out it will cause a corporate “heart attack” and kill even a profitable business stone dead.
So what can you do to minimise the impact on your business when you are faced with a short term cashflow problem?
“A sale is not a sale until the money is in the bank”
A simple sentiment, but one that can often be lost in the thrill of securing that next big sale. But when the agreed upon payment day passes and you have no sign of the promised payment, what is the best way to go about securing the funds?
If you extend credit to your customers you are effectively providing finance to them for the credit period.
If your business does not have the cashflow to support the credit it has extended you could be just one bad debt away from insolvency.
Credit Insurance can be a valuable tool in a company’s credit control armoury and recent years have seen an explosion in availability of different types of cover.
From traditional Whole Turnover to Catastrophe or Single and Multi Buyer cover brokers can now offer a variety of policies to suit most businesses.
When it comes to cashflow, it isn’t just about ensuring your invoices are paid on time. It encompasses the entire flow of money in and out of your business and covers your businesses dealings with your own suppliers.
So do you treat your suppliers as you would like to be treated?
Invoicing is an integral part of every business, so taking the time to ensure that your paperwork really works for you is often a wise investment.
In part three of the Managing Cashflow guides from the ICM and BIS you can find a wealth of useful information to help your company avoid the common invoicing pitfalls, reduce delays and remove excuses for non-payment.
After ensuring your company really knows your customer, knowing when you can expect your invoices to be paid is the next step in an effective credit control process.
Agreeing payment terms in advance helps to ensure both parties accept and understand their obligations and allows for the creditor to forecast the arrival of funds, a key survival strategy in today’s turbulent economy.