How To Prevent Cashflow Problems

  • 0
Prevent Cashflow Problems

How To Prevent Cashflow Problems

If you want your business to survive and thrive, preventing cashflow problems is vital. According to statistics, the vast majority of new businesses that fail do so because they haven’t managed their cashflow properly.

We hope that the following tips will prevent you from falling into the same trap.

1. Ensure that customers pay you on time

It is imperative that you encourage quick payment if you are relying on receiving money from your customers to pay your suppliers. You will still have to pay them even if you have not been paid yourself.

You can stick and use a carrot approach to make sure that your customers pay you promptly. Try offering early payment incentives and quoting the Late Payment of Commercial Debts (Interest) Act of 1998 on your invoices. The latter allows you to charge interest on overdue payment.

2. Budget properly

Good budget management is a key way to prevent cashflow problems. Do avoid the temptation of spending money that you had not planned to spend when setting your yearly budgets. Question the likely return on investment (ROI) of any promotional activity before allocating funds to it.

3. Careful account management

Do you know when your invoices were sent out? Do you know who you are still waiting for payment from? Have you chased up late payments?
Managing your accounts carefully is an important aspect of preventing cashflow problems. When invoices were sent and paid so that you can see easily if any payments are outstanding, keep an invoice books detailing exactly.

4. Run credit checks on companies before doing business with them

Try offering early payment incentives and quoting the Late Payment of Commercial Debts (Interest) Act of 1998 on your invoices. The latter allows you to charge interest on overdue payment.

Vetting companies by performing credit checks or other tests is a very good way to find out if they are likely to pose a cashflow threat to you if you do business with them. Failure to research a potential client’s payment history means that you run the risk of not getting paid.

Good budget management is a key way to prevent cashflow problems. Do you know who you are still waiting for payment from? Have you chased up late payments?


Leave a Reply