Late payments are no joke – a recent research has revealed that small businesses are negatively affected by late payments to an aggregate of no less than £266 billion. This is money not paid on time, money that rightfully belongs to the small business, and hence funds a small business is not able to use right away to grow their own enterprise.
The result? Cash flow problems, often to the extent that the small business has to borrow, or worse, eventually close shop. You have to make sure that doesn’t happen to you. Luckily, there are some things to prevent this. Here’s how to make sure late payments don’t adversely affect your business.
Forecasting is powerful
Forecasting can be a very powerful tool, provided you do it with honesty and that you project various scenarios – the good and the bad. One common mistake of small businesses is that they don’t plan ahead, or don’t plan ahead realistically. Often it is
not a challenge or the slipping of sales that cause the problem; it’s failing to take it into account. Have a plan ready. Have several plans in mind.
Check your clients
It’s always tempting to make a sale, especially if there is a promise of a large income. However, make sure the client is reliable, so perform a background check before committing. It’s often better not to make a deal than to make a deal with a person or company that fails to pay you, or pay you on time.
Think for the future
Your cash flow is the most important issue in your business, so you should already have in mind how you’re going to create income and spend your funds weeks, months, or even seasons in the future. Your plans will not always work out, but doing business without a plan is a recipe for failure.
Have a financial plan
There will be times when you are faced with a dilemma and simply don’t know what to do. That’s normal, and it certainly isn’t a disaster – especially not if you take the time to research your options. Chances are you have a lot more options than you think – they’re discovered only with time. Research funding options, credit lines, alternative clients, and so on.
In essence, it’s about three things – three very important things, as affirmed by the accountants in central London from GSM & Co. First of all, be realistic about your business and have a clear plan for the future. Secondly, understand that a healthy cash flow is an essential way to success. Thirdly, don’t make a deal unless you are reasonably assured that your sale will in fact give you a good income in the foreseeable future. Do background research about your customer; it’s better not to make a sale than to regret having made it if they pay late.