Turnover vanity, profit sanity but cashflow is reality.
The New Year is always full of promise to alter ourselves, our lifestyles, our environment but we should also take time to alter the way we look at our business.
Running a successful business can be a drain on your time.
The clamour to service clients and fulfil orders often takes over the opportunity to analyse your financial exposures and risks.
We all know that 2023 is going to be a challenge, a recent study showed there were 1,900 business insolvencies in December alone.
Read on to learn how to avoid being a victim of the insolvency statistics.
Now is the time to study your customer’s payment habits.
Do you have a customer who has taken longer and longer to pay? If so, make a note on your accounts system to flag them up as a concern. Then make them your priority when you’re conducting your credit control. Contact them first before any others, the quicker you action a concern, the speedier you are to get paid.
Do you have a customer who consistently orders more goods than their suggested credit limit ?
Conduct some credit and diligence checks on that customer. Make sure that they are worthy of the extended credit limit that you are giving them? Remember, until you are paid it is YOU that is funding your customer’s business.
There are many credit checking facilities out there such as CreditSafe, Experian and others. You may find your bank offers a similar service, perhaps not as detailed but still useful in any event. Use the facility to consistently check whether the customer should be receiving a larger credit value. If they are worthy of an increase, then perhaps extend their credit limit. Your customer will appreciate the vote of confidence and may even provide further orders. However if the customer is not worthy of an increase in credit, what actions are you taking to protect yourself on these increased orders.
Our advice is to never let it lie. Address the issue, inform the customer of the credit challenge and insist on either a pro-forma or upfront payment to bring their credit account back into terms, or suggest they stagger the orders whilst they pay for the current account. A New Year is the time for new starts and new beginnings, so let’s all start by putting best practice into our businesses and securing our futures for the tough times ahead.