Cash is King
Your approach to managing your cash flow could make or break your business.
Whether you are the owner of a small business, or working as an independent professional, cash flow is of vital importance to the health of your business. It is often said that: “revenue is vanity, cash flow is sanity, but cash is king”. What this means is that whilst it may look good to have large inflows of revenue from sales, the most important focus for your business is cash flow...
Cash comes into your business (cash inflows), mostly through sales of goods or services and flows out (cash outflows) to pay for costs that you must incur in order to produce or provide your goods or services. The difference between the two is called the net cash flow. It is, of course, desirable to maintain a positive cash flow in order to pay your bills on time, and invest in the growth of your business.
Our Cash is King series provides top tips you can use to significantly improve your cash flow.
Part 2 - Turn Pain into Paid
For many small businesses and independent professionals, particularly those providing a service rather than selling goods, offering credit terms to customers is a necessity if they are to remain competitive.
There is, however, nothing worse than doing your work, providing a service or obtaining a desired product for your customer, only to find yourself faced with a debtor who simply cannot, or occasionally will not, pay you.
You should never feel guilty about collecting a debt.
You are owed money for goods or services supplied. The law is on your side.
Approaching your debt collecting in a structured way will improve your chances of a successful outcome.
If by taking a disciplined approach to debt management your customer is offended, you should question whether this is a customer you really want to keep.
We provide some helpful guidelines, and identify our preferred cloud app that will help you get your overdue invoices paid quickly...
Start collecting debts early
Start the collection process as soon as the sale is made, or even before, by gaining full agreement to your terms of payment. Always try to establish your customer's credit worthiness before offering credit - there are numerous web-based credit checking facilities available, either as a subscription or on a pay-as-you-go basis.
Wherever possible request a part-payment or deposit in advance.
Never forget that the reputation, survival and success of your business may depend on how well you are able to collect overdue accounts.
Make yourself familiar with your customer's accounts payable processes and policies - Find out who will be responsible for approving your invoices and who will arrange for payment, ask them what they will need from you to ensure invoices are dealt with in a timely manner. Who should your invoices be addressed to? What information is required to be included on your invoice?
The key to improving your ability to collect overdue accounts is to get organised.
You can use an aged debtor analysis to provide you with a list of accounts receivable that are due and overdue.
- List accounts in order of size and due date, start by ranking largest debt first and then ranking earliest date first.
- Online accounting software, such as QuickBooks Online will automate this task, but even using the sort function in a spreadsheet will work.
Learn your customer’s payment cycle - When dealing with large companies, find out the last day for getting an invoice approved and included in the payment run. Call a couple of days before that date to make sure that they have all the documentation from you that they need.
Anticipate where you can - Consider giving a reminder call the week before your payment is due, especially if you have identified a specific group of customers which tends to pay late.
Create good karma
Treat your suppliers the way you would wish to be treated by your customers.
When cash gets tight, strong supplier relationships can mean that your suppliers will be more likely to work with you to help you get through.
Satago - Helping you get paid quickly
Satago is a great cloud-based app that will help you get your overdue invoices paid with less effort and better results.
Satago works with online accounting software like QuickBooks Online to proactively reduce your debtors and improve your cash flow.
Start improving your Accounts Receivable in seconds
Take control of your Accounts Receivable and start getting paid faster in seconds. Satago integrates quickly and easily with most cloud-accounting software, including Quickbooks Online.
Automate customised invoice reminders
Satago takes the burden of sending email reminders to debtors off your hands. Use Satago's proven default templates to quickly set up reminders, opt to customise by escalation level, or per customer.
Understand the risk of your sales ledger with integrated Experian risk data
The bedrock of good credit control is to know your customers. Full credit reports can be overwhelming for a small business owner, but contained within them are a few key metrics that every business owner should be aware of: the credit score; the credit limit; and the Days Beyond Terms (DBT) data. Satago has partnered with Experian, the world's leading credit reference agency, to make this data easily accessible for you.
Track your debtors with interactive reports
Easily understand the state of your Accounts Receivable and identify your problem customers with our beautiful, interactive charts, including Aged Debtor reporting, so your credit control team can work more effectively. Reports can be exported as PDF, too.
Provide your customers with monthly statements
Automate a monthly overview of all open invoices with your customer, or click a button to send one off whenever you like. As with everything else in Satago, these are completely optional and customisable per customer.
Automate customisable "Thank you" emails
"Thank You" emails can be configured to be sent automatically after you reconcile a payment in your accounting system. There are two templates for the Thank You emails: one for payments that are received on time or early, and one that can be sent when you receive a payment after the due date.
Resolve queries with your accounts receivable CRM
Satago's commenting system allows you to comment on invoices, leave notes on customers, and have a clearer oversight of any dialogue between you and your customers.
Send physical payment demand letters
When email isn't enough, easily send payment demand letters in the post with one click. No need to lick a stamp or visit a postbox again as Satago takes care of printing and posting no matter how many you send.
Escalate an invoice to a Credit Manager
If all else fails, at the click of a button, our experienced credit managers can call your customer on your behalf to press for payment. Details of all calls are recorded in Satago so you know exactly what's happening.
Having an accurate cash flow forecast at your fingertips will help you focus your debtor management. Make sure you read Part 1, Failing to Prepare is Preparing to Fail, for some great tips that will help you to create robust and reliable cash flow forecasts.