Small businesses are highly dependent on healthy cashflow and the consequences of late payment can have a huge impact. Therefore, managing cashflow and enforcing credit control is essential to protect your business from the effects of bad debt.
The recent Global Business Monitor from Bibby Financial Services Ireland published in October 2017, gives us a glimpse into the experience of Irish SME’s. When asked which area is the most problematic in managing their business cashflow, over half (57%) of Irish SME’s cited collecting payment from customers on time. The average time SME’s wait for payment is 36 days and the average amount written off being €13,780.
You may not be able to rely on your customers 100% of the times, but there are steps you can take yourself to ensure cashflow keeps flowing.
Here are a few steps you can take to manage your debtors effectively and offset the risk of bad debt for your business.
Invoice quickly and accurately – Send invoices on time. E-invoicing can speed up the invoice issuing process as well as provide a record that it has been sent. Using technology, such as quality credit control software to automate manual processes can also enable a pre-emptive approach to payment delays.
Keep track of your figures – If you don’t know who owes you money, you don’t know what is owed to you. Go through your debtors lists monthly and invest in good accounting software that you can access online. Make sure you keep it updated so you’ll be able to tell at a glance who owes you money and how much.
Make payments simple – A straightforward process can ensure that customer payments are made easily, and preferably online or by direct debit.
Send prompt reminders – As invoices become due send reminders, starting with an email. If there’s no response within two business days, follow up by phone. Be proactive about this and keep copies of all communications. Don’t start new work or supply more goods to someone who owes you money.
Consider bad debt protection – For peace of mind and to safeguard against non-payment, bad debt protection provides reassurance that any debts will be protected in the event of customer insolvency or inability to pay. Credit control and sales ledger management services can also help identify potential issues before they become a problem.