Many small businesses overlook the importance of credit control. They assume that because the orders and sales are rolling in thick and fast, everything is great. What they fail to realize is that if a few customers don’t pay, their cash flow will dry up.
You need to be proactive about collecting payments from your customers. It’s not enough to send out an invoice and forget about it. There will always be some customers who wait as long as possible before making payment. The problem is that if you don’t have enough money flowing into the business, it affects your ability to pay your own suppliers. Some might be understanding, but others, in particular the IRS, definitely won’t take kindly to being made to wait for payment.
The best way to manage your cash flow is to be on the ball with your credit control. The onus is on you to set up an effective credit control system. Accounts receivable financing will free up cash flow, but this doesn’t solve the underlying problem. Effective credit control should be implemented from the outset, so you start on the right foot. Here are some tips to get you started.
1. Use an Efficient Accounting System
It pays to be organized in business. A fully functional accounting system is essential, as this will help you to monitor your income and expenditure. There are plenty of free accounting systems, but many businesses prefer to use a recognized system such as Sage. If in doubt, ask your account for advice, but whatever you do, don’t ignore the day-to-day bookkeeping.
