15 minute read:
Supercharge your cashflow – tips to boost the bank now!
Given these uncertain times its’ never been more important to get a handle on your cashflow.
There are some simple actions you can implement right now to boost the cash in the bank.
The easy wins are steps taken to:
Ensure your business is spending its money wisely.
Eliminating spend on the stuff that doesn’t add value.
Making it really easy for clients to pay you promptly.
Building a clear, agreed approach on how you deal with non-payment.
Find clever ways to boost your income.
And communicate and negotiate when you can’t pay suppliers.
Let’s take a look at these in more detail.
Simple and painless ways to reduce costs
When you know things are getting a bit tight, the first thing to do is to take a look at your outgoings.
Ensure you are paying a fair price for your business essentials and you understand all of your expenses.
Cleanse your direct debits
Check through your bank and credit card statements and your subscriptions.
Looking out for any regular payments for software and services that you and the team never use but forgot to cancel.
This also applies to those sneaky auto subscribe apps on your Apple ID. Check them out under your Apple ID setting for subscriptions for anything you don’t use that’s set to renew itself.
Rethink business expenses
Rather than getting bogged down in rules and complicated procedures for when and how team members can spend company money and claim business expenses. Challenge yourself and your team to ask one simple question when spending company money:
“If this was my own money would I be comfortable spending it on this?”
Encourage employees to treat company money as they would their own. If they would seek out the best price/quality option say when booking a hotel for a personal trip they should apply this thinking to business trips.
Shop around for utilities and telecoms
It’s easy to leave your utilities and telecoms providers in place for years without questioning the service and price.
But when it’s something like your personal car insurance renewal you are straight on those comparison sites to save yourself that £100 or so.
So it’s worth reviewing the market place for utilities and telecoms. It’s never been more simple to change providers. And the new provider will do all the work for you once you’ve made the call.
You are likely to find a better package – which will not only result in lower monthly costs – but will also give you a better service. Think faster broadband, more reliable phones.
Example
Let’s take an example of a small business we recently saw was paying £90 per month for their broadband and phone line. This had been going on every month…for years!
One call to a challenger telecom provider and the cost is reduced to £30 per month.
Be smart with stationery
Do you always order your stationery from that same company? You might be looking in a brochure for that ‘preferred supplier’ and not questioning the prices. Do you even know how much you spend on stationery each month?
You should shop around for better deals on your regular essential purchases.
This doesn’t always mean going to Amazon Prime. There are a number of start-ups selling items, such as printer toners, at highly competitive prices. So you can save money while supporting other small businesses.
Frictionless payments
It’s so important to make it as easy as possible for customers and clients to pay you.
Often they don’t deliberately not pay you…. there might be something in your invoicing process making it hard for them!
Remove any unnecessary barriers to non payment by following these steps:
Include a link to easy pay options on your invoice
When you send an invoice ensure it is really clear how to pay!
As well as bank details give them options to pay via card (e.g. through Paypal) so it’s really simple.
If you use Xero for invoicing you can set this up as standard.
Get repeat customers on Direct Debit
Using a service like Go Cardless you can eliminate the chance of forgotten or late payments.
The funds just come into your account each month.
Invoice straight away
Be sure to invoice your customers promptly in line with agreed payment terms.
Having just had the service from you they will be expecting the invoice and any queries can be dealt with immediately.
If you use cloud based accounting software you can easily invoice from an app on your phone when you are on the go.
Know HOW to get the invoice paid
As a general rule, when dealing with larger companies, there will usually be a little more structure around how you get into the system as a supplier and get paid.
Speak to your contact at the company to find out how to get the invoice paid. Make sure you know if there is a supplier set up form you need to complete. A particular reference number or purchase order number you need to include on your invoice. Is there a special email address you need to send it to?
Finally, make sure you know when the company makes payment runs. Your invoice might state that it is due immediately. However, practically if the company only do a standard payment run on a Thursday or perhaps only once a month. If you know that you can plan when you will be getting paid.
There is no harm in the making a friendly enquiring to the accounts department to ensure your invoice is on that payment run as expected.
Overdue debtors
You want to ensure you get paid for the work you’ve done. When the problem is your customer’s slow payment it is important to have a plan of how to proceed.
The next set of tips address how to best recover those debts:
Ensure your terms and conditions explicitly cover payment terms
Ensure your customers agree to terms and conditions of doing business with you. This helps set expectations and will help you take a professional approach with any kind of disputes.
You can use something like Docusign to manage these engagement terms and conditions electronically.
It is critical that your terms and conditions cover payment terms. And the consequences of non-payment, the action you will take if they do not pay.
It is much easier to chase slow paying customers if you have an agreed procedure. And to enact non-payment clauses such as charging interest.
Set up automated invoice reminders
When you invoice from accounting software like Xero you can send automated reminders for overdue invoices as standard.
These can be set with friendly but business like messages to remind your customers they have an overdue invoice to attend to.
Offer incentives for prompt payment
You could consider offering a % discount to customers who pay immediately.
A speedy payer might well be worth the small reduction in income.
Know how much they owe
A good way to manage your aged debtors is to know exactly who owes you money in real-time.
Ensure your bank is regularly reconciled so you know exactly who has paid and who still owes you money.
Then you can take prompt action.
Have a robust plan for persistent non-payers
Speak regularly to non-payers, try to work things out. Escalate the conversations as appropriate through your business. From accounts staff chasing, to the account manager, to the Finance Director/managing Director as appropriate.
Where possible agree payment plans with them that suit both parties. This could be paying you say £500 a month until the debt is clear. Ensure you track the agreed payments against the plan to ensure that they stick to it.
When they still don’t pay or you struggle to get any communication from them. Its tie to escalate more formally in line with your policy. Here you might want to use a third party debt collection company. Which can be more cost effective than you think to resolve the problem.
Consider using invoice financing options
Boost your income
When you need to get some more cash in quickly consider the ways you can increase how much you get paid.
The next set of tips deal with exactly this.
Get a deposit in advance
For large projects, where you will incur costs to deliver the project or service. It is sensible to agree that the customer will pay a deposit in advance.
The deposit should help to cover the costs of obtaining materials and labour ahead of invoicing.
Then ensure you invoice for stage payments at regular, agreed intervals. Set out in the quote and terms and conditions.
Who could you sell more to?
You have some wonderful customers who always pay on time. Consider if there is anything else you can do for them?
They might not yet know about your other service offerings.
There is no need for a hard sell, it’s just about dropping it into the conversation.
Ensuring your marketing and regular communications to customers reflect what your business does.
Who could refer you?
When those wonderful customers (who always pay on time) ask you how business is going, don’t be scared to say:
“well we currently have some capacity if you know of anyone we can help”.
People love to recommend a great product or service they have experienced so remember good customer experience is a sure way to get talked about.
Be proactive in asking for feedback and testimonials.
Invoice financing
Invoice discounting can help when late supplier payments are holding you back. Perhaps you deal with some certain types of business where the norm is to get paid on 60 day terms.
As such you have tens of thousands held up in invoices that you just wish you could get paid a month earlier.
Invoice discounting facilities can be useful for short term debt financing.
Integrating a payment option with a company offering a ‘buy now pay later’ service like Iwocapay means you receive payment for the invoice upfront while the customer gets credit to pay over 3 instalments
What could you sell?
If you have old equipment lying around that still has life left in it. Turn it in to cash!
Pop it on Ebay or a local selling site to make some quick cash for the business.
Manage the money you owe
It’s important to stay on top of what you owe to others and carefully managing the relationship to agree payment plans when times are difficult.
Know who you owe
Keep good visibility of your payables so you know who you owe and when.
Ensure invoices are promptly entered into your accounting software. With an accurate payment due date.
So when you run reports you can accurately see how long you have to pay each suppliers invoice.
When you know you have to pay late… communicate!
It can be natural to want to avoid that difficult conversation. You know you know won’t be able to pay that supplier in full on the due date.
But equally you know their credit controller will be straight on the phone and you’ll then be avoiding phone calls…
Suppliers are more likely to react favourably to your late payment if you contact them in advance.
Explain the payment will be later and give them an expected payment date.
Then there will be no surprises and irate phone calls chasing you.
Negotiate a payment plan
When you cannot pay your suppliers or other debtors (e.g. HMRC) in full. Take the weight off your mind and stop the incessant chasing letters and phone calls.
Agree with them a payment plan to get you back on track.
If it is HMRC then this guide is useful to help you negotiate.
Other quick wins
Can you rent out some office space?
If you pay for a large office with a bit of extra capacity, consider renting out a room or even just a few desks to another small business or freelancer.
Non-cash rewards?
Consider the impact of introducing some non-cash incentives. Such as extra annual leave.
Bonuses can lack impact once all that tax is paid. And money is proven not to be the best motivator.
Flexible project resources
If you have tasks to be done that don’t fit a full time role – don’t pay someone to be bored!
Consider offering the role part-time or think if it best fits as a one-off project for a freelancer
Hire an apprentice
Not only is this a great way to get new ideas into your business while supporting the local community.
You can get funding towards the costs of training and developing an apprentice.
So there concludes our practical cashflow tips…
We hope they help you supercharge your cashflow! And give us a shout if we can offer any more support
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