Prevent Cashflow Problems By V Selman At Isnare.com Ezine Articles

Preventing cashflow problems is vital if you want your business to thrive and survive. 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. Make sure customers pay you on time

If you are relying on receiving money from your customers to pay your suppliers, it is imperative that you encourage prompt payment. After all, you will still have to pay them even if you have not been paid yourself.

You can use a carrot and stick approach to make sure that your customers pay you promptly. For instance, 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 carefully

Good budget management is a key way to prevent cashflow problems. Therefore, do avoid the temptation of spending money that you had not planned to spend when setting your yearly budgets. Also, 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 essential aspect of preventing cashflow problems. Keep an invoice books detailing exactly when invoices were sent and paid so that you can see easily if any payments are outstanding.

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

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

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