Cash Flow is King in Every Business
5 Simple Credit Control Tips
The dream of every business is to earn money and make profit as well. This can be achieved by offering quality goods and services that makes them stand out from their competitors to their clients. The profit gained is reinvested into the business to manufacture better products for their clients. The profit should also be reinvested into the employees to ensure that they are rewarded & trained properly for the job they carry out. This in turn will ensure that clients are then receiving the level of service they would expect.
Now let us step into the real world of business. Since the recession banks in Ghana, businesses have been suffering badly as a result of Late Payment of their clients. Billions of Cedis are written off by some of the businesses in Ghana each year because of Late Payment. Some big businesses hang smaller businesses out to dry, by not paying them for long periods of time just to push them to the wall and even when they will settle, they settle only a small percentage of what was originally owed.
This whole scenario is a very bad state of affairs, so how can we resolve the issue and ensure your clients pay their accounts on time? Here are some simple tips that can easily be implemented. This will deliver results straight away and ensure that your cash flow remains intact.
- Clearly set out your Payment Terms & Conditions;
It is very important to set out the payment Terms and Conditions of your company in writing. This should be attached to your contracts or credit application forms and also stated on your invoices. It amazes us the amount of businesses who simply do not have any payment Terms and Conditions, and even if they have their clients are not aware of them because it has not been brought to their attention before. Debtors are conscious of what they have to pay, but if this is not set out in black and white then the company has nothing to fall back on, should the debtor start to query these. Setting out your Terms and Conditions in writing highlights them to your clients and creates a clear and consistent approach for payment.
- Reward Clients who pay on time;
A good customer is a paying customer as we always tell our clients. Research has proven that rewarding negative behavior has little impact. Say you have an employee who is continuously scrutinised for making small mistakes. This employee will feel underestimated and his/her overall performance will suffer as a result of this. Whilst you would want the employee to improve and give feedback on where they have gone wrong, make sure the employee also receives positive feedback on areas he/she is strong at to make them improve and demonstrate positive behavior. You should try and reward clients who pay on time. For Example, you could give the client a discount off their invoice for paying early or on time or offer them a discount on their next order as long as they pay within the timescales set in your Terms and Conditions. This will make your clients feel special and valued by the business, which in turn will increase sales and turnover.
- Send your invoices out with the goods or services
A lot of businesses we deal with raise invoices to their clients at the end of the month, where the client has already received the goods or services. They supply the goods to their clients for two to three weeks before sending an invoice. This is not good business practice, and invoices sent at the end of each month are often paid late. If they receive invoices as and when the business transaction happens, there is the likelihood that they will pay on time. Sending invoices throughout the month and immediately after goods or services have been supplied is also beneficial because the company will have a constant flow of cash coming to their account.
- Do not be afraid to approach and speak to your clients about payment
You have to give your clients some days to pay before you can pursue them legally for payment. However, this does not stop you from calling or emailing them to ask when you should expect payment. Credit Control Departments should have a robust process in place for this. They can call clients straight after invoices have been raised to deal with any queries or disputes promptly, then call or email them 15 to 30 days after the invoice has been raised to see when payment will be made. No business feels happy when pressing their clients for payment because of fear of losing them but this demonstrates to clients that the business is on the ball with their credit control. After 30 days contact should be made with the client on a daily basis, if this contact is not made it implies that the company does not urgently needs payment.
- Make sure you have invested in the right IT Systems
There are lots of Customer Relation Management (CRM) databases and software to assist your business with cash flow and Credit Management. Businesses needed to ensure they invest in the right ones. Successful Credit Management is about having a clear overview and excellent processes in place to deal with your credit control. In order to streamline the sales to cash process it is very important to use the right software. Specialized Software is much more advanced than say an Excel Spreadsheet. Spreadsheets can contain a lot of data which can sometimes be incorrect due to data entry errors or changes in formulas, which can quickly lead to the wrong information being viewed. If you invest some cash into specific software for your cash flow which can help you view late payers at the click of a button, this will ensure you are on top and one step ahead of your clients for chasing payment.
All of the above are easily implemented into a business, with little fuss or cost, would in turn lead to big changes within the business. Small modifications can lead to invoices being paid on time or more promptly, and in turn ease your cash flow, making clients return to buy more goods and services. This will ensure a happy working environment.
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