To be able to grow a business, access to reliable cashflow is essential. This means that there is cashflow available for growth initiatives when they arise. Quite often, the window for growing a business is quite narrow, so having the funds available to utilise at short notice gives a business a great advantage over its competitors. However, the reality for many businesses is that they do not have a reliable cashflow. This means that instead of focusing on the growth of their business, the majority of time is spent continually chasing late paying debtors.
American Express released a special report in 2016 “Behind the Balance Sheet” that highlights the cost of not managing cash flow. The report found 65% of mid-sized businesses expected to grow in 2017. However, 86% of them were likely to find it challenging to access the capital they will need.
Being constantly restrained by cashflow issues is a major concern of many medium sized businesses. In fact, 66% surveyed in the American Express report stated that a lot of the time spent on cashflow management was a distraction from being able to work on other aspects of their business – including developing growth strategies.
So how does your business become one of 33% that does manage cashflow effectively and be able to take advantage of growth opportunities when they arise?
One of the keys identified is to develop a cashflow management system that is suited to your business – rather than chasing debtors in a haphazard way when cashflow is running tight. The cashflow management system also has to start before you actually provide credit to a customer.
Types of matters that need to be taken into account when developing an effective cashflow management system include:
- Developing a credit policy and sticking to it. This policy should include a credit limit for each customer;
- Using Credit application forms. They are critical in obtaining the information you need to decide whether to extend credit to your customers in the first instance. Follow this link for more information on credit application forms and how they can benefit your business;
- Verifying information supplied by customers on credit application forms using ASIC Checks. Unfortunately, many credit application forms do contain incorrect or misleading information and the best way to verify information is through ASIC Checks. Brodie Collection Services can provide ASIC checks for your business;
- Making it a standard procedure to chase debtors as soon as they are overdue. The longer a debt remains outstanding the less chance you have of being paid; and
- Having a policy for when to call in a debt collection professional. Sometimes a debtor will simply not pay until they are contacted by a professional debt collector.
All these strategies will help you take advantage of any growth opportunities that arise by freeing up time and resources that would have been spent on chasing debtors and improving cash flow.
Brodie Collection Services is one of Melbourne’s leading debt collection firms. They can provide ASIC search services and land title searches. They also provide debt collection services on a no collection, no charge basis. You can trust them with all of your debt recovery needs. Visit www.brodiecollectionservices.com.au to find out more about the debt collector services that are offered by Brodie Collection Services or call Philip on (03) 9889 9977.
This information provides a general summary only and is not intended to provide specific advice for your individual circumstances. It is not a substitute for professional advice and should not be relied upon as such.