Since the financial crisis, lending conditions have become much stricter, which has created an opportunity for alternative financiers to enter the market. Many of these are investing significantly in their technology, to the benefit of SMEs, since the tools emerging are supporting SMEs in managing their cash flow in many ways.
First, what is the best practice for managing your cash flow?
- Firstly, DO look at your accounts receivable – it is obviously important to improve your sales and turnover, but ignore the problem of not getting paid at your peril!
- Find an accounting software or add-on that allows you to:
- Automate what you can to take the pain out of chasing most of your debtors personally – nowadays you can leverage sophisticated technology capabilities such as an accounts receivable customer relationship management (CRM) system
- Know your customer – effective, thorough analysis of customer credit risk data will allow you to adapt your approach accordingly
- Choose to use Invoice Finance (selective invoice financing in particular, which provides finance against individual invoices)
- Make sure you do the following:
- Send invoices a.s.a.p. once a job is complete
- Ensure your invoice is accurate: better to give too much detail than too little
- Request your clients include your invoice numbers as references for every payment they make to help you work out which invoice has actually been paid
- Strong and precise subject lines; reminders escalating in tone as payment becomes overdue
- Issue invoice reminders with proper wording and sufficient information – the first needs to be sent actually before an invoice reaches it’s due date
Tools that can help
The right tools can help take the pain away from chasing your invoices and automate much of the process, bringing in best practice templates, frequency of reminders, and allowing you to focus more on the business of running your business. Technology companies like Satago are really leading the way in providing technology that adds value to your cash flow processes in different ways.
Should you fill your cash flow gaps with finance?
With late payments an ongoing, unavoidable issue, small businesses frequently use finance to bridge the gap. In fact, 51% of finance taken by small businesses is used to fund cash flow gaps1. With the traditional overdraft more difficult to secure, Invoice Finance is becoming an increasingly popular alternative.
What is Invoice Finance?
Invoice Finance means, for a fee or discount, your provider will be able to advance an amount of money against a single invoice or your entire sales ledger until the payment is due. Today’s suppliers, with their more sophisticated technology and risk assessment techniques, are offering far more affordable, flexible funding than their predecessors did, which frees up working capital and facilitates improved cash management.
Following some of the simple credit control tips is something every business should be doing. Using automated processes and tools makes sense and often needs little or no set up costs. Professional management of your processes will improve your relationship with your suppliers as well as your cash flow.
Satago is an all-in-one online finance and cash-flow platform offering finance and receivables management to micro-businesses and small- and medium-sized enterprises (SMEs). The FinTech (financial technology) firm serves a large but under-served business segment in the UK, overcoming the issue of late payments by converting outstanding invoices into cash, and using innovative technology to give small businesses the same level of credit control as their larger counterparts. (www.satago.com)