These are extraordinary circumstances and for many of our PCA Members and many other businesses, the worry of cashflow and getting paid is increasing day by day.
Off the back of a recent ‘Tune In Tuesday‘ our special guest, Tracey Westell of Cash flow and Credit Agency ‘Pecunia’, shared with members her top tips to help you deal with your cash flow during the COVID-19 crisis and beyond.
We know that all our members and other businesses are facing many struggles and making decisions that they never thought they would have to. Conversations members will have with their customers and suppliers will no doubt be difficult during these times and it’s hard to see the light at the end of the tunnel.
Members were advised on the webinar that SME’s could be faced with two viruses this year – not only Coronavirus, but also, the long running pandemic of all SME’s life is late payments of invoices and reducing cashflow. Therefore, they have come up with some ‘top tips’ to ensure members are on the case to seeing those invoices paid on time.
Top 8 tips to help manage your cash flow
1. Check your sales ledger
This may be time-consuming to begin with, especially if you have not done this for a while. Nevertheless, spend 10 minutes a day to check your sales ledger and see who owes you money/is due to make payment over the next few days.
2. Call your customers
Maintaining a personal and business relationship with your customers is key in any business and this applies equally when calling them for payments which are due to you. Some conversations may be difficult but a 5-minute conversation is more proactive than an email. Explain the reason for your call, listen to what the customer says and aim to reach an agreement about when and how the payment will be made.
3. Is your invoice clear?
We are not trying to teach you to suck eggs here, but there are times when the finite details are missed which can make all the difference – if it’s clear who it’s from, you may find your invoice gets put to the top of the pile.
- Make it stand out by using your company branding
- Make sure it contains the word ‘Invoice’
- Add a unique sequential number to make it easy to track
- List your company name, address and date
- Summarise each product/service provided and the date
- Include the name and address of the customer
- Add a payment due date
- Include bank details
- Provide a contact number and email for any queries
- Send out invoices within 24 hours of providing the services/goods and schedule polite payment reminders. And, don’t forget if you are VAT registered you need to include your VAT number
4. Keep an eye on your existing clients
Carry out your own ‘due diligence’. This is where members can ensure clients have been credit-checked, and that they are not posing a risk to your business for owing more than their credit limit is listed for. During these unstable times, it may be an idea to also review this on a more regular basis, especially if you are receiving larger orders from your clients than would normally be the case. It could be that they have no credit with other suppliers.
5. Due Diligence for ALL new customers
There will be times when you find you have an influx of new customers. This can be good, yet it could also be a big issue to your business if you do not do a thorough review and undertake due diligence on these new potentials.
They may want to start trading with you honourably, however whilst the economy will be stretched, they may be seeking someone to afford them credit to keep their business trading. Members need to ensure the survival of their business and remember you are not a charity and have your own overheads to pay.
6. What to do if non-payment is persistent
- Have you actually sent the invoice?
- Have you called the customer for payment?
- Have you sent reminders as part of your collection process?
- Have you issued a final demand?
- If your debtor is a business, then issue a ‘letter before action’ including the late payment of commercial debts (interest) Act 1998 & regulations 2002
- If your debtor is an individual, you must adhere to the PAP (pre action protocol)
- Do not be afraid to take action – Issue a MCOL (Money Claim Online). There is step by step guidance to help you. Alternatively ask an expert for assistance.
Now is a great time to speak to your customers during this uncertain period. Reach out and see what ‘temporary’ arrangements you can make with them to ensure you get paid.
This may be in the form of offering a discount if they can pay you early? This can assist your cashflow at this time, but this is something you should not do without some thought. Review your cashflow forecast on a week by week basis and ensure that you can cover all your liabilities and outgoings first.
Secondly, speak with your suppliers, find out what their situation is, see if they will offer you a similar facility. Perhaps this might be an opportunity to reward customer/supplier loyalty through some mutual leeway on arrangements, including payment. If this is something you can facilitate within your cashflow forecast, then don’t delay – be pro-active.
8. Get expert advice
When did you last MOT your credit control processes and your cash flow management? This is crucial to any business trading on credit, and without having robust processes and policies, the ability to track your cashflow and keep on top of your cash inflows and outflows, as well as profits will be hard to review. More importantly its about being on top of your recoveries, and having the right protocol within your business to safeguard it from failure through lack of cash flow and loss of customers and supply chain.
Also, look at your cash inflows and outflows to see what leverage you might have to minimise financial impact on your business.
‘Health Check’ Available for your business
Pecunia offers a free 1-hour ‘health check’ for your company’s credit management procedures, ranging from applications for a credit account, through to risk assessment and cash collection. Tracey Westell can be contacted on firstname.lastname@example.org for more information, or you can visit their website:
We are here for our Members
These are unprecedented and uncertain times. Blogs from guest speakers, industry experts or partners, enhance the range of information and tools which are out there to help, advise and support PCA members.
For further information, call us on 01480 400000.
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