Numerous organizations give credit in one particular way or another, ordinarily by supplying goods or services and supplying an invoice for payment later. The time between the issuance of your invoice and collection of amounts due is often anything amongst 14 days and several years based on the service being offered.
It's important to make sure that the flow of money in the company remains solid; you might need to settle balances with suppliers just before you have collected your earnings on sales which means that a gap in cash flow must be financed for a brief time frame. Most companies overcome this situation by holding cash in reserve or by possessing a line of credit with their bank, ordinarily in the form of an overdraft.
But what occurs when a buyer doesn't pay their invoice in a timely manner? For several small and medium enterprises (SMEs), this has the possibility to spell disaster; especially where there is certain difficulty in extending credit by way of the bank or where a 'buffer' reserve of cash is unavailable.
With quite a few organizations seeing longer delays with the settlement of invoices, SME owners want to keep a steady hand on the rudder with regards to cash flow. There are lots of strategies to help maintain a healthy money throughput in your company:
1. Raise invoices instantly
As soon as you have supplied your goods or services, raise an invoice promptly and send it to your customer. This signifies that the buyer is immediately aware that the invoice must be paid and if the client operates a monthly settlement cycle, the invoice should be included with the subsequent payment run.
2. Don't Shy Away From Payment Chasing
Chasing payments shouldn't be taboo; if your company is owed income, don't be afraid to mention outstanding invoices when conducting your business negotiations, in particular where payments are due or have already passed their payment due date. Where invoices have come to be overdue, make every effort to make contact with your customer to actively chase payments. Standard statements of account can also help highlight overdue amounts.
3. Amend payment terms accordingly
Start to lower the time allowed for payment if it is important; minimizing terms from 30 days to 14 days can help, or in specific circumstances try to acquire payment upfront or on delivery.
One point that quite a few SMEs fail to really think hard about is the payment methods that could be used. Direct Debits can help cash flow in quite a few circumstances: when receiving an invoice, the client is made conscious that payment will definitely be requested and taken automatically from their bank account on a stated date and you hence know when the funds will arrive into the business. Where transactions happen to be unsuccessful, as an example as a result of insufficient funds inside the bank account concerned, a report is offered the following day showing the transactions that failed. This offers you the chance to take proper action to chase your clients for payment sooner.
Accepting Direct Debit as a type of payment needn't be as highly-priced as your bank will often make out. You will find quite a few BACS Approved Bureaux that have in recent years, invested heavily in their systems infrastructure, information and physical security and internal processes which signifies which you do not have to make a sizeable initial capital outlay and may take advantage of the economies of scale provided by making use of a third party Direct Debit Management Business.
Direct Debit Collection businesses will also use their expertise to provide guidance and help to choose whether or not Direct Debit is suitable for your enterprise and which product solution is best suited to you; and certainly, by outsourcing the payment collection function, you will be in a position to focus on what matters the most - expanding your business.
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My name's Viv Halom and I've been working with Eazy Collect for almost 10 years, helping companies to process direct debit payments from their customers. Our job is to help companies get paid on time.
As a BACS Approved Bureau, Eazy Collect adheres to strict regulations to ensure your and your customers data is completely secure.
http://www.eazycollect.co.uk
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