Struggling to
maintain cashflow levels?

A guide to making sure your business gets paid on time

More than 60pc of entrepreneurs are struggling to maintain cashflow levels due to delays or defaults on the payment of creditors’ bills, according to research by Tenon Recovery.

35pc of the businesses surveyed estimated that late payments cost them in excess of £10,000 a year both in terms of bank charges and the administrative costs of chasing payments, even before the additional practical difficulties of day-to-day cashflow control are taken into account.

The average amount owed in late payments rose by a third in 2008, bringing the average amount owed by UK companies to around £40,000.

Initiatives that business owners can implement to address this issue:

1. Agree realistic payment terms upfront
Standard credit terms should be defined by how quickly you have to pay for materials and provide services; payment terms should be part of standard terms and conditions, contracts and every invoice.

2. Make it easy to be paid
Those with difficult payment processes are more likely to be affected, ensure clarity as to whom payments should be made to, how they should be made and provide bank details to accept BACS payments.

3. Credit check new customers
Background checks on new customers will help with your planning and decision-making with regard to the provision of any services. Credit reference agencies offer a valuable source of information, while you can also consider insuring trade debts.

4. Have a clear procedure for credit control
Ensure communication lines are kept open and a clear procedure for credit control is maintained, polite but insistent reminder letters should be sent on a regular and consistent basis.

5. Don’t be afraid to take action
Late payment is a significant threat to your business and should be reacted to as such - chasing late payments is vital to survival in the current climate. It is also important to know who to chase for late payments and leave a trail by using email and faxes in case you have to take collective action.

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