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How to Maintain Good Cashflow


It is vital for a small business to keep a good cash flow and to keep it healthy. Even though chasing late payments is annoying, late payments can really damage your cashflow.

 

Why is good cashflow important?

Without good cashflow it’s difficult for a small business to then supply for themselves, like paying for bills and suppliers. It can give your business a bad reputation if you start paying your supplier late. This can also give a negative impact to your business credit score because you might have to set up new accounts. By having a bad credit score you might then get turned down for credit cards or loans.

 

What happens when cashflow isn’t protected?

Recently some big businesses have failed because they don’t have good cashflow, meaning they can pay their smaller subcontractors. This then causes a domino effect for small businesses as they need to cut back on staff, scale back operation or even go out of business. A lot of big businesses going out of business is quite rare, however for small businesses its common which means you really need to protect your cashflow.

 

How do I protect my business?

Before agreeing anything with a customer or a supplier make sure you do some background checks to make sure they are reliable. If a supplier fails to deliver a product to you, this could start making your business look bad because you won’t be able to fulfil your own orders resulting in poor customer service.

You should also check your existing customers as well, as they can still pay you late.

 

How do I stop late or non-payments?

A phone call or an email to remind your customers to pay is a good idea, some account teams only pay invoices on a particular day of the month or need invoices by a certain date, make sure they supply you with this information, so you know for the future.

If you still don’t receive a payment after chasing them, stop supplying them goods until they settle the invoice.

Added: 18 Apr 2019 11:30


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