It’s a sobering fact that nearly 7,000 companies entered liquidation in the first half of 2016, and that most small businesses fail as a result of bad debt and cash flow issues. Throw the uncertainly of the current economic climate into the mix, and you’ll start to get an idea of just how important it is for today’s Micro and SME businesses to get serious about credit control.
If you’re not on the ball when it comes to your business’s finances, you might find yourself struggling to stay in the game. Here are my top tips to help you stay extra-vigilant and in control, ensuring that your credit control is shipshape instead of slapdash!
Be on top of updating accounts systems.
The days of throwing receipts into a carrier bag and manually typing up invoices with no real record system are looong gone. Today’s small business owner is almost spoilt for choice when it comes to software packages that can take the headache out of accounting. Affordable and easy to use, many packages offer free trails such – Xero and Quickbooks – enabling you to find the one that suits you best. With time-saving features such as automated entries, invoicing, bill payments, expense reports, financial reports and reconciliations and even availability on mobile devices, you can manage the process from start to finish even when you’re on the go.
Once a system is set up, receipts can usually be scanned on your phone and uploaded directly into the software package. No more chucking everything into a drawer and panicking at tax return time!
Invoice as soon as you can, and double-check your invoices carefully for errors before sending. Don’t be afraid to call new customers a few days after sending an invoice to make sure it has been received.
Cut to the chase when it comes to getting paid!
According to recent research, SMEs collectively wrote off £8.5bn in bad debts in the past financial year. That’s a LOT of money and a hell of a lot of hard work unrewarded.
You’re certainly not alone if you find chasing clients for payment uncomfortable or awkward, and it’s a job that’s often put to the back of the queue. But the longer the debt remains unpaid, the more difficult it becomes to collect and the more at risk you are of being caught with a bad debt.
Consider setting up an additional email address as accounts@ which will make chasing easier and help to show the business is bigger than it actually is. If you’re chasing by phone, be confident, polite and professional: let your customers know that payment within the agreed terms is important to the company and the relationship.
Remember that the payment you are chasing is for YOUR HARD WORK, so you have no need to feel guilty or embarrassed!
Check your cheques.
Another way small businesses are losing out on payments is by forgetting to deposit – or losing their cheques. With as many as one in five business owners forgetting to cash cheques at least once a week, missing out on an average of £740 each time, it’s time to tighten up those processes!
Keep right on top of tax changes.
HMRC are making some big changes with regard to digital filing of tax returns and payment of tax. By 2020, most businesses, including companies, partnerships and individual taxpayers who are self-employed, will be required to keep track of their tax affairs digitally and update HMRC at least quarterly. Check out what’s happening here: https://bit.ly/1T1bai2
Of course you CAN do all of the above yourself, but if business accounting, chasing debts, or managing your tax return doesn’t float your boat, or if it eats into the time you need to work on your business, or into your personal time, then you’d be wise to look at resources that can help with these responsibilities. Accountants and Book-keepers can help and you can, of course, look to work with a VA: they can probably carry out the tasks faster than you can and work to a budget you are comfortable with.
The important thing is to tighten up your processes and streamline your systems to give your business the best possible chance for success and growth. Don’t bury your head in the sand: the potentially disastrous knock-on effects of a casual approach to credit control are clear.
To find out how we can help with any of the above, contact Jo on 07928 228764 or 07928 228 764