Can you make your Cash Flow ‘Covid proof’ ?

It’s been a struggle but we’ve all pitched in together and between us we seem to have got through the worst of this pandemic. However in a business point of view, is the worst still to come ?

The Government is slowly turning off those taps of support and its time again to stand on our own.

The challenge comes with the fact that during lock-down, many companies were not generating revenue, meaning there is no money in their accounts. A lack of liquidity has a huge bearing on cash-flow, for both the Buyer and Supplier.

So how do you mitigate your exposure and risk in these troubled times ?

The answer is as simple as A, B, C.              …. Analyse – Bill – Contact.

Stage 1 – Analyse.

They say knowledge is power and all knowledge comes from information. Unfortunately there’s no exact way to say who’s been affected more than others. Just because they’ve been around for 50 years and been a customer of yours for 10, doesn’t mean to say they’ve had either the strength or financial clout to ride out this pandemic properly.

Credit checks are a great start but only use a credit check as a guide. The information contained in credit checks is historic and is very rarely up to today’s date. A lot can change in business almost overnight. However that said, if a company had a good historical financial history pre-Covid, the likelihood is they may have sufficient business acumen to come through the other side.

Credit checks are only the start of a robust analytical process. Internet searches, trade references and company reports are all excellent tools to add to a process and allow a Supplier to build an accurate picture as to the risk a customer may bring.

Stage 2 – Bill.

If, after completing your diligence you’re prepared to trade with the customer, now is the time to be prudent with your exposure and risk. Don’t get carried away with working without reward. We advocate to all businesses in these troubled times to raise littler invoices more often.

Can you break down your service / supply into smaller invoicing segments ? For example, if you’re a commercial electrical contractor conducting a complete re-wire of a property, can you bill in phases. Alternatively can you agree with the client a series of payment applications and stage payments, for example every two weeks a payment of £2,000.00 needs to be received.

Raising smaller invoices mitigates risk. Should a customer struggle to pay a smaller invoice, then this is an indication they’re short of funds and it’s better to learn these things sooner rather than later. Should your payments stop, you have the option of stopping work until you are paid meaning you can concentrate your time, efforts and money on another project that IS paying you.

Stage 3 – Contact.

As with all things in business, action is the key. Cash is in short supply at the moment, many businesses haven’t been open for months and haven’t being raising invoices. Many businesses raise invoices on established credit terms and so face the prospect of having no income into their business for perhaps another 30 days, or even more.

One of the fundamental keys to great credit control is being organised. Set yourself some time aside each week to manage your accounts, allocate your payments, review whom owes you money and then speak with these customers to secure your payment.

Don’t let the current plight of many businesses delay your thoughts in asking for your monies. Everybody is in the same boat, everybody needs what’s rightfully theirs and it may well be that your pro-active action of recovering your monies inspires those to ask for their own monies in turn and will lead to the continued flow of cash through the economy.

Don’t forget, unless your business is credit control then asking for your monies may not be your forte. Don’t be put off, simply be prepared. Have your ledger to hand, familiarise yourself as to what’s owed to you and use your regular script to make those calls.

But if you’re still not okay with the tricky subject of asking your customers for money, no need to worry, your expert credit control adviser is at hand… after all, that’s what we’re there for.