HOW TO GET PAID ON TIME
Nearly all businesses in Ireland, except for maybe consumer-focused companies, have one very bad characteristic in common – they rarely get paid on time. As a nation we’ve always been known for our generosity but it seems that we find it hard to stump up for work that has already been carried out. That creates a myriad of problems of course, not least that it starves businesses up and down the country of the main resource needed to operate and survive – cash!
When you don’t get paid for a job on time you are, inadvertently extending your credit terms. This means that you have given the client more time to pay without actually specifying or agreeing any new arrangement. As you can probably guess, this sets a very dangerous precedent. If the contagion spreads to other customers you’ll very quickly start to notice a real problem and most likely a downward spiral of your cash flow.
Of course, the last thing any businessperson intends to do is to put their company in harm’s way. However, if payment isn’t forthcoming or if credit terms are being blatantly ignored, then, whether you like it or not, the existence of your business is called into question. For any company – especially start-ups, who are particularly poor when it comes to dealing with debtors – it is important that you set out your credit terms and policies in writing at the very beginning of a business relationship. This clears up any ambiguity that may come into play further down the line. It’s also prudent to have a system in place to issue invoices promptly – on the first of every month for example – even if some of your clients are still in arrears.
It’s important that you keep your emotions in check too. We know how hard it is for new businesses who are struggling with cash flow – especially when they’ve put their heart and soul into a piece of work, only to be told that it’ll be another 30 or even 60 days before they receive payment. However, anger or frustration won’t get the bill settled any quicker. What does help some people is sending a statement of account along with every invoice, acting as a reminder for customers that the last bill won’t just go away if they don’t think about it! Specifying an additional charge or interest rate on late payments can also help motivate customers to pay up.
Of course, calling people to ask for money isn’t an easy job. Many entrepreneurs tend to put this unpleasant task on the long finger, and their business suffers as a result. If you find yourself in this situation it’s a good idea to enlist the help of professionals – at DCA Accountants and Business Advisors, for example, we offer a credit control service so you can get on with the business of running your company. We’ll contact your debtors on your behalf, which means that you won’t be put in the situation of chasing a client for payment while at the same time trying to build a lasting business relationship with them.
We always advise our clients to set up a standing order facility with their customers, which means that they are assured of being paid on time as long as that client has the necessary funds to do so. If they don’t, it should set off some alarm bells. Aside from helping with with cash flow, it also takes awkward conversations out of the equation, meaning you can concentrate on developing and building your business relationship. We can help put that arrangement in place for you.
Running a business today is not easy but the last thing we need to do is make it harder for ourselves. Following these steps or handing over the credit control function to an experienced outsourced provider can alleviate a lot of the pressures that can very easily strangle a business if not managed correctly.
DCA Accountants & Business Advisors.
For more on our services or to receive a free consultation for your business from one of our experts, visit www.dca-ireland.ie