Whatever your business structure you will need to keep financial records. Not only to keep the friendly folk at HM Revenue &Customs happy, but also to form the basis of your annual accounts. The announcement in January by HMRC that they intended to crack down on poor record keeping by SMEs, with potential fines of £3,000 was a wake up call to all businesses.
Aside from avoiding potentially hefty fines, good financial records will also help you to monitor the performance of your company and make informed business decisions. Good systems, accurate records and timely reports also result in greater business efficiency and provide you with the information you need to manage your cashflow and run your business successfully. An added bonus is that you can stay on top of those customers who seem to be allergic to paying their bills, by acting quickly.
I was stood inside a workshop collecting the overdue balance plus costs from the business proprietor “Mr Smith”, whose business owed several thousand pounds. I was paid in full, not by cheque – I don’t accept them, but in cash. This wasn’t money owed to me. This belonged to my client who was struggling with several unpaid invoices and was barely solvent.
When I asked “Mr Smith” why he hadn’t paid his bill on time he mentioned that he needed the cashflow as his own business was growing rapidly….!
Don’t be used as a bank.
While we all strive to maintain our business relationships and don’t want to endanger established contacts with harsh payment regimes, we also need to establish firm terms of business and adhere to them.
Unpaid invoices are a growing problem for SME’s and a staggering £33.6bn is currently overdue. The average amount owed is a staggering £39,000 according to recent research conducted by Bacs*. How much are you owed?
So how can we prevent unpaid invoices?
Avoid customers with poor credit history or stipulate cash on delivery to those in that category.
Most invoices state that the terms of payment are within 30 days. Stamp the invoice with the date that the payment is due to you as a prominent reminder.
If an unpaid invoice passes the deadline, phone them immediately and chase your payment. It’s your money, and your customer needs to realise that you are as efficient in business as you are in collecting monies owed to you.
Until a customer pays their bills don’t do any more business with them. If they can’t pay this invoice how will they pay the next one too?
Lastly, there are no friends in business when an invoice remains unpaid. If they respect you enough as a business they will pay on time as you do.
Most customers will pay on time, and adhering to those simple points will certainly assist in maintaining a good business cashflow.
In my next guest blog….
Learn several easy ways in which we can collect your unpaid invoices, including the addition of interest to those outstanding balances. Yes really! You can charge interest on commercial debt!
Mark Walker of Walker Enforcement Ltd.
Debt Recovery, Certificated Bailiff and High Court Enforcement Services.
“turnover is vanity, profit is sanity, but cash is reality”
This has never been more true than it is today and lack of cash is the number one killer of small businesses. Recent times have seen a tough economy, meaning customers will pay you more slowly and suppliers will want you to pay them more quickly.
So what measures can you put in place to keep on top of your cash flow and maintain a healthy business?
Are your invoices just pieces of paper requesting payment?
If so, you may be missing a key advantage they have over anything else you send to your customers – they’re actually obliged to look at and take notice of them!
Also, as potentially the last contact your customer will have with you, an invoice may be the last chance for establishing a lasting link with them. A customer who pays and then wanders off into the wilderness is a waste of the resources required to attract them.
“Mommy, a calculator will help you to work faster, just don’t tell anyone!”
Lily, aged 6 and 3/4
These wise words were uttered by my daughter during one of her many ‘pep talks’. I receive such nuggets of fabulous advice on a regular basis and it’s the innocence and excitement in such fantastic revelations that melt my heart and make the hard work worthwhile. I am a proud Mum to two beautiful girls, happily juggling my parental responsibilities, my dream bookkeeping business and a fulfilling home life.