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Recent newspaper headlines and articles have begun to give cautious optimism that the end of the recession is approaching. For anyone actually looking to raise finance or continue in business the reality of the situation is likely to be very different.
The Banks remain reluctant to loan without significant upfront charges and at interest rates that are significantly above UK base rates, but in line with the inter-bank rate or LIBOR that we heard so much about in the Winter. As this source of finance remains restricted we return again to our suppliers as a form of unofficial credit. That means that your customers are using you as a form of credit too!
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In order to ensure that your cash position remains positive you must learn to chase your debtors effectively. This will mean that you review your entire sales process from taking the order to receiving the cash. You need to ensure your sales systems capture the following:
- Agree the scope of the work to be carried out, including the fees and the timing of the invoices;
- Remember to send the invoices at the agreed times and for the agreed amounts;
- Agree any additional works before undertaking them and highlight these amounts on the invoices;
- Remind your customers that the due date for payment is approaching and ensure that there are no problems with either the goods/services or their ability to make the payment;
- Should the payment date be missed enquire into the reasons and agree a payment plan if necessary.
Do not confuse a friendly relationship with your customers with the need to maintain a professional distance. You have bills of your own to pay and you should not be afraid to ask for money that is due to you; be robust and take commercially minded decisions about how you approach slow payers. You have the right to charge interest on late payments and should not be afraid to apply it where necessary. Think what advice you would give someone who was in your position and follow that advice through!
If you would like to discuss this important area in more detail please contact Neil Elsden on 01793 616284.
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