Simple Tips to Improve Your Business’ Cash Flow
Proper cash flow management is vital to the success of any business. Here are a few simple tips to better manage your business’ cash flow:
1. Know your clients/customers Avoid payment disputes by ensuring you know who your customer is – is it an individual or a company? If it’s a company, ensure you confirm its ABN/ACN.
2. Provide Terms of Trade Ensure you have written terms of trade and provide them to clients/customers prior to (or at the time of) providing any goods or services; it’s a good idea to incorporate them into any quote document you provide.
3. Review Terms of Trade Regularly review your terms of trade to ensure they are still reasonable and address any issues that have arisen in your business. If you traditionally have struggled to maintain good cash flow, consider reducing your payment terms. Ensure any revised terms of trade are provided to all (and not just some) of your customers.
4. Invoice Quickly The sooner you invoice, the sooner you get paid. Send an invoice as soon as you have provided goods or services. Provide a reasonable amount of detail in your invoices to avoid payment disputes.
5. Follow Up Outstanding Invoices Don’t sit on outstanding invoices – have a process in place to promptly follow up on them. If you don’t have time to do so (or are uncomfortable with the idea of chasing customers/clients for payment), engage a third party to do so on your behalf.
6. Carefully Manage Credit Don’t offer more credit to a customer than your business can afford to lose. If you are taking particularly large orders, or a customer seeks large amounts of credit, insist on some form of security which will give you priority over other creditors if your customer becomes insolvent or bankrupt. This might be in the form of a “retention of title” clause or if your client is a company, a personal guarantee from one of its directors.
Jenkins Legal Services regularly reviews and drafts terms of trade and advises businesses on how to protect their interests better. If your business needs advice, please call 4929 2000 or email office@jenkinslegal.com.au
