If somebody asks you, as a small business owner, what your greatest asset is within your business, you may talk about your expertise, the efficiency of your staff, or the unique nature of your product or service. However, in virtually every business the correct answer is your cash. If you don't pay very clear attention to how this flows into and out of your organisation, you're not likely to be around in several years' time. How should you manage this and, in particular, how should you ensure that other people pay you on time?
Don't Make Assumptions
It's easy to get overwhelmed when you're in the early days of any new operation and you might think that the bank account can take care of itself for the time being. You may think that your customers fully understand your terms and conditions and will always comply with them. However, you may be making a big mistake.
Understanding the Risks of Credit
Most of the time, you will be providing your goods or services to your customers on credit, and you should be as careful in handling this part of the business as a bank manager would be, if they were extending it. Outline your terms and conditions very clearly, and, if need be, get a good attorney to help you to write them in the first place.
You have to get your customers to confirm that they have read and understood them, and it is best to get them to sign an appropriate document as well. If you have any disputes in the future, it'll be a lot easier to stand your ground.
Most importantly, focus on when they need to make payments by and how you are going to accept the cash. Don't be shy in stating your position and detail the type of interest or penalties that may be due, should they default.
Get the Invoices Out
Some business owners make the mistake of handling invoice generation only once per week, or worse at the end of the month. You need to make an invoice at the exact moment that goods and services are supplied and not when everything appears to be quieter. On the invoice, remind your customers how they can pay you and what the deadline is and if you're not sure about the content of this document, ask your solicitor to clarify everything.
Bringing in the Troops
It's unfortunate, but a certain number of customers will default, and this is when your debt recovery system has to kick into gear. Start off with a friendly phone call that firmly underlines your terms and see if that works. After a few days and no response, it'll be time to bring in the professionals.
For more information, contact a debt recovery specialist.