Maintaining a good cashflow is important for all businesses. However for small business this can be the key to survival. This is particularly important for small businesses in the post Covid environment.
Below we discuss some ways in which businesses can speed up their cashflow.
Get customers to give you authority to direct debit their account on the day the invoice is due. Using smart direct debit facilities such as Go Cardless you can automate this process where the customers is notified before the direct debit is processed. The payment automatically gets deducted from the customer’s bank account and is paid to you.
You can also direct debit your customers on delivery rather than waiting the normal 30 days to be paid. Read our article on Direct Debit for more information.
Easy payment options
- Providing your customers with easy payment options will also encourage them to pay you promptly.
- Using software such as Xero Accounting you could add payment services to your invoices where customers can click on the payment link on the invoice and pay it the minute they receive your invoice.
Send a gentle reminder
Sometimes all it takes is a gentle reminder to get paid. We have to remember our customers might be busy and just forget to pay. Constantly reviewing your accounts receivables and sending reminders when necessary could be all that’s needed.
Give incentives for early payments
Early payment discounts have been used by larger organization such as councils and electric companies for years. You could implement a similar incentive for your customers which would encourage them to pay early and improve your cashflow. However we do suggest that you speak to us before implementing such an incentive as it’s important to understand the effects of this on your margin.
Late payment penalties
Applying late payment penalties or charging interest for late payments could encourage customers to pay on time. Decisions to implement late payment penalties needs to take in account your customer base and any negative impacts it might have on future sales.
Ask for upfront or payment on delivery
Small businesses and business operating on thin margins might not be able to finance their customers for the normal 30 days before they get paid. These businesses should consider earlier payment terms or asking for payment upfront or on delivery.
There are many ways to speed up your cashflow, if you are having difficulties in getting paid call us and we will be able to assist you implement systems to improve your cashflow.