According to research from Bacs, more than 50,000 British small firms are closing every year, being owed £14.2bn in unpaid debt.
Getting clients to pay and on time is proving difficult for many business owners in the UK who rely on a fixed income for cash flow and continued growth. Although regularly chasing payments from clients is not only an inconvenience, it could also mean your business is about to fail.
Research showed that two out of three companies only have enough cash reserves to last three months or less.
However, you do not need to fall under one of these businesses by taking these pro-active steps;
Track your figures
To keep your business successful and running, be familiar with your figures and keep an eye on them. For example, make sure your cost of production is equal to the cost of your products or services so you can turn a profit. If you are not making profit and have no cash reserve, this could be dangerous for your business.
Be thorough and monitor your figures weekly or monthly when it comes to tracking orders, takings, margins, and costs so you are able to react if cash is decreasing before the situation escalates.
Running the business numbers regularly also help you calculate net profit to assess the financial health of your company.
Analyse were you are failing
Are you being paid quickly enough by your customers? Are you using effective accounting systems to issue and chase invoices promptly? Have you got sufficient processes in place to deal with late payments when they happen?
Figure out the weak areas in your business, analyse and address them as soon as possible, for example; upgrading your accounting software or using direct debits as method of payments.
By adopting effective and efficient payment processes and setting up accounts software will make it easier to manage your accounts and keep aged debtor analysis up to date.
Automatic payment methods
According to research from BACS, although many small businesses are still seeing difficulties with late payments, in the last five years the total amount owed to UK businesses has been cut in half.
Developments in accounting software has made significant changes in sending out invoices and collecting payments, however payment processes such as direct debit are improving businesses bas they automatically take regular payments from your customer’s bank account are being discovered by more and more small businesses.
By getting to know your businesses weaknesses as well as strengths and taking action, you are taking positive steps for your business to thrive and survive.
Some Businesses fear a more pragmatic approach to recovering unpaid Business Debts. Essential partners for a Business should be an Accountant, A solicitor and a Professional Business Debt Collection Agency. High level professional Debt Collection Agencies support UK Businesses every day by recovering unpaid debts.