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Show Me the Money

by Julian Campbell

Without money flowing into your business, survival is impossible. Cash flow is the lifeblood of any business. So why are most businesses so blasé about their credit management?

Recent events surrounding the demise of many National icon businesses and other local businesses have shown how easy it is for small businesses to get caught. They end up being owed a lot of money; money which they will probably never recover. Your business can not afford this.

The introduction of any taxation changes will further exacerbate the strain on already burdened cashflows resulting in the need for a more serious systematic approach to credit control. However, this does provide an excellent opportunity for you to review and tighten-up your terms of trade right now. Many of your suppliers will be doing just that. Can you get paid up front? What is stopping you? When we really examine it, it is only our mindset.

If you are going to allow your customers time to pay, it is vital that you have an appropriate application for credit form which allows you to obtain accurate information about the legal entity you are dealing with and a personal guarantee. Then you need at least three trade references and these should be diligently checked before you grant credit. At least you will be able to gain some idea of this new customer's credit history. This must be followed with a systematic follow up for late payments immediately they become due.

Unfortunately, although the process is very simple, it is also a little time consuming in your already busy day and it becomes one of those chores that you are always going to get around to but never do. But isn't worth the effort to get paid?

Then there are the businesses that don't want to offend their customers by asking for a credit reference or even delay in following up those outstanding debts. Remember a customer is not a real customer until they have paid you for your goods or services. I am sure we can always find plenty of people to take our products or services for free but that's not business.

Now is the time to get serious about your credit control. Systemise your procedures, clarify your terms and make it clear to your customers that this is how you do business. Ask them to "show you the money" and watch your cashflow improve out of sight.

Copyright © Julian Campbell 2007

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