Fix your business’ credit control today

Help small businesses thrive. That’s our mantra here at Capital on Tap, and it’s driven our offering since day one. We were recently chatting to our friends at Chaser, the cloud credit control software, about 6 options you have when your business needs an urgent cash flow boost. They ended up giving us some fantastic insight into the mistakes many small businesses make with their credit control function, inhibiting their cash flow. As cash flow is the lifeblood of a business, we asked them how small businesses can most effectively combat these mistakes and establish a world-class credit control function.

Here are the 3 things your business needs to do today to fix its credit control function and get invoices paid on time.

1. Knowledge is power. Arm yourself.

If your business sells on payment terms, one of the biggest mistakes you can make is assuming each of your customers operates the same way. Avoid setting yourself up for excuses and late payments by asking these 4 questions every time you supply a new customer:

  • What information do you need to make payment? (Although your invoice should already include the following: payment details, accepted payment methods, payment terms, invoice date, your VAT or sales tax number, and the correct description and cost of the goods/services)
  • Does this purchase require you to approve a purchase order? (And if so, when will it be approved? Plus don’t forget to include the PO number on the invoice)
  • Who is responsible for making payment on this invoice? (And how do I contact them?)
  • When do you make your payment runs?

Armed with this information, you won’t be blindsided by your customer with excuses about not following procedure. They’ll be forced to justify the unjustifiable – why they haven’t paid you on time when you’ve done everything correctly.

2. Polite persistence pays. Chase consistently.

“Polite persistence pays” is a motto of Chaser’s, and it’s an incredibly effective philosophy to follow when conducting credit control. Chaser have seen that almost 80% of invoices can be collected on time through email chasing alone. Here’s what you need to be doing to maximise your effectiveness of email chasing.

Every email chaser you send needs the following information to be effective:

  • Your business name
  • Invoice reference number
  • Amount owed on the invoice
  • Payment due date
  • Number of overdue days (if invoice is overdue)
  • And always attach a copy invoice

In providing this info, you eliminate any chance of the customer using the excuse that you haven’t provided enough info for them to make payment.

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It’s important, however, that your email chasers always remain polite and are sent often enough to keep you front of mind in your customer, but without harassing them. To achieve this, a good rule of thumb is never chase more than once a week or less than once a fortnight. Armed with the knowledge you acquired earlier, send your chasers to the person responsible for making payment on the invoice, and consider timing these chasers with when the customer makes their payment runs for maximum chance of getting paid quickly.

While email is a very effective medium for chasing up unpaid invoices, don’t forget the phone. Especially if your customer is slow to respond or sends vague and unclear replies. A rule of thumb from the Chaser team is to make a call after every third email chaser.

And finally, once payment is received on the invoice, whether it was on time or not, always thank your customer for paying. You’ll positively enhance the relationship with your customer and help encourage timely payment in future. Just a quick one-sentence email is enough, but make sure you do it within the 24 hours after receiving payment for maximum effect.

3. Maintain your invoice communications history neatly.

While the above advice can work wonders on the efficacy of your credit control function, it can be undermined by the lack of a single source of truth. Without consolidated and well-maintained invoice communications histories, a world-class credit control function crumbles. Scrambling through sent emails, multiple inboxes, or notes scrawled on the back of an envelope are all unnecessary risks and time-wasters from the credit control of the past. If your business still manages its credit control function this way, it could easily be racking up hours wasted every week. Not to mention operating with the unnecessary risk of missing key info when it isn’t consolidated into one location.

Whenever you’re conducting credit control with an incomplete picture of the situation, you’re inviting your customers to delay payment. You also risk damaging your business’ reputation by providing conflicting info, having to backtrack on something you mistakenly said earlier, or simply creating the image of a “pushover” company.

Keep a centralised log of all chasers sent, replies received, phone calls taken, and notes made. Make sure it is easily navigated and searchable by customer, invoice, and date. This will not only save your business a world of time, it will empower you to deliver world-class credit control and get your invoices paid on time.

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Chaser is cloud credit control software to get your invoices paid on time, in less time. Their average customer saves 7.3 hours a week on credit control, and boosts their cash flow by £4,400 per £100,000 of turnover. Check out how their product can help your business today.

Essential tips for business budgeting

Efficient budgeting is essential to any small business and will often dictate how successful a company will be in the long term. Having a firm grip on your finances not only allows you to plan for a more secure future, but it also provides an insight into which parts of your business are problematic.

If you find yourself struggling when it becomes time to pay the rent, it should be obvious that better organisation of your key expenses is in order. If it becomes apparent that capital isn’t flowing freely through your business, better clash flow management is necessary. Budgeting is a great way to ensure that the future of a business is bright and to highlight areas where there is room for improvement. With this in mind, here are our top five tips for successful budgeting.

1. Cash flow projections

When it comes to estimating your potential sales and profit figures, it is always better to be realistic. Although a business may appear incredibly successful, it is impossible to predict the future. Small businesses are particularly at risk from cash flow crises and need to be wary. Consequently, reserved estimations ensure a healthy cash flow and keep your business from drying up.

2. Pay off debt quickly

It is incredibly difficult to start a small business without accruing some type of debt. This in itself is not a problem, though entrepreneurs should attempt to begin paying off their debt as soon as possible. The interest payable on most debt can be a black cloud hovering over newer businesses and, if left too long, can cause serious financial problems.

3. Build a reserve from profits

Though it may be tempting to reinvest all the profits from a good month back into the business, it is better to have a contingency reserve in case of emergency. Markets are volatile and the business world difficult to predict, so a small ‘bank’ of monetary reserves on which you draw from when times are tough makes good business sense.

4. Know your industry

When budgeting, it is always a good idea to have a comprehensive understanding of expected expenses in the industry. This means researching what other businesses tend to spend their revenue on and establishing whether these costs apply to your business. The most important considerations will be your essentials, such as rent, utilities, raw materials and labour.

5. Review regularly

Finally, it’s vital that small business owners regularly re-evaluate their budget and budgeting processes to ensure that it is still applicable to their context and situation.While larger organisations may do this annually, the fact that smaller business are much more volatile means that they may have to do this every month or two. Reviewing more regularly may be time consuming but it can be highly beneficial in the long term.

Maximise your business budget by accessing Capital on Tap’s flexible funding facility. Applying only takes 2 minutes and does not affect your credit rating.

Apply Now!