Posts Tagged business discussion
Getting customers to pay their bills on time is one of the biggest challenges a business owner faces. According to the Department of Business Innovation and Skills, last year 4,000 businesses failed because of late payments and cash flow issues. Analysis of invoices highlights that many are submitted late or are deficient due to having the wrong details on them, leading to the incorrect processing of the invoices.
If a customer’s payments slow down, it’s advised that you should check them out as it may be a sign that they are in trouble, therefore it would be better to stop supplying than to suffer a bad debt. On average, small businesses in 2012 wait two months on top of their payment terms to get paid.
However there are a few tips for trying to ensure the invoice is paid correctly and on time:
- Send invoices ASAP – and make sure they are sent to the right person. If they need to be passed from person to person, department to department, this will slow the process immensely.
- Explain every single charge clearly and concisely.
- Make deadlines clear from the very beginning – especially from when they sign the original contract.
- More invoices to clients for smaller amounts.
- Send a hand-written thank you note to the credit controller on a regular basis – get to know them, so that you are pushed to the top of the pile.
- Find the best date to get the invoice to the customer so it doesn’t go past their cut-off date and another month is wasted.
- Learn about customers’ internal accounts processes and work with them. Get your best customer to pay quickly.
- Be tough and don’t accept excuses
- Threaten to use winding up orders to excerpt more pressure on debtors as a last resort.
Aside from these tips, there are other methods that could potentially be utilised to secure payment on-time.
- Take upfront deposits before you even start working. Since the start of the recession this is more acceptable.
- Utilise discounts or loyalty rates to get paid quicker.
- Only pay on set days in the month to hold onto your cash longer.
- Use suppliers as a line of credit, instead of banks.
- Swap excess funds in your operating account into an interest bearing account. Ask your bank to automatically sweep excess funds.
Invoice Finance– Is it only for struggling businesses?
That used to be the case, but now it is a good form of finance. Invoice Finance bridges the gap between the point at which you make a sale, and the time payment is received. An arranged percentage is released to you, which is good if the customer has long payment terms .
Choose either Factoring or Invoice Discounting- Either the finance company chase your customer or you chase your customer.
Don’t forget, under the law you can claim interest at 8% over the Bank of England base rate, and compensation of between £40 to £100 on each overdue invoice under the Late Payment of Commercial Debts (Interest) Act 1998. This does not have to be referred to in your Terms and Conditions, and can be applied to goods exported to the EU.
To summarise, getting paid on-time to keep cash flow projections on track is hard. Use your educated guesses to project cashflow which is based on a balance between understanding your customers payment habits and your realistic management of expenditure.
All points in the article above were taken from conversations at The Business Exposure Group where business owners and Directors are invited to take part in round-table discussions at venues across the North of England.
If you are a business owner or Director and would like to be considered for an invitation, please contact Philip Drazen directly at firstname.lastname@example.org
The Business Exposure Group (BXG) has recently been garnering praise for their invitation-only round-table business discussion meetings. One guest recently claimed, “It was the best three hours [that I have] spent in the last five years.”
Founder of the BXG, lawyer and businessman Philip Drazen, set up the company so business owners from various sectors could troubleshoot, discuss, and create a mastermind “think tank” that could be trusted, by engaging with other forward-thinking business owners.
Amid these vibrant discussion forums, the BXG meetings also offer the potential for making top-quality connections.
It has already inspired a couple of successful business ventures and could alternatively offer you, perhaps, the opportunity to find a part-time non-executive director to help your own businesses grow under guidance from a seasoned businessman.
As it stands, these discussion groups are constantly expanding, assisting and creating a positive outlook for all businesses in the region involved in the Business Exposure Group.
For more information on how to attend a Business Exposure Group meeting in either Manchester or Leeds, Wetherby or Sheffield please e-mail: email@example.com
Basel III is a series of reform measures, developed by the Basel Committee on Banking Supervision, which are designed to strengthen the regulation, supervision and risk management of the banking system. They have been devised in response to the financial crisis and aim to strengthen the banks ability to respond to economic stress and regulate their risk management procedures.
What does all this mean for the SME?
One definite consequence is that the days of an endless credit supply are even further away than ever.
Basel III sealed a deal in September 2010 to triple the size of the capital reserves that banks are required to hold against losses. It sets out a new key capital ratio of 4.5% – more than double the 2% level in 2010 – plus a new buffer of a further 2.5%. Banks whose capital fall below the buffer zone will face restrictions on paying dividends and bonuses, so the rule sets an effective floor of 7%.
The new rules will be phased in from January 2013 to January 2019. These tougher capital standards are considered critical for preventing another financial crisis but this has curtailed lending, economic growth and is costing jobs.
For the banks, these rules will mean reshuffling their client bases and change products to reduce the amount of risk they take on. Less risk means fewer loans and higher costs associated with those loans.
For business owners, it will lead to transformed banking relationships and different types of funding.
All business owners, despite their best efforts, occasionally face dissatisfaction from their clients. It’s how you respond to the disappointment or mistake that determines whether there will ever be an opportunity for a reprieve.
A mismatch between a customer’s expectations and your business philosophy can have major implications for your future relationship. But in this economic climate, is it worth cultivating such a customer and turning them into a good client or are we better off letting them remain an infrequent buyer?
Is it sensible to take on every customer that comes through the door or do we still need to put in procedures to find out whether people are going to be good customers or awkward?
The important thing to remember is to put everything in writing so people’s expectations from the sale to the delivery of the product or service are understood by the customer and the supplier. Businesses should be as explicit as they possibly can about what they can and can’t provide and what a particular product includes or excludes so there can be no confusion once delivery has taken place.
Once someone has complained it gives you a great opportunity to turn them into a good customer because if they’ve taken the chance to express their unhappiness at least they feel sufficiently interested to complain rather than walk away.
Many angry or dissatisfied customers are venting their frustration or anger at things outside of the situation – perhaps in their personal lives – and if you take the time to listen and empathise it can often take the sting out of the tail and you can then move forward.
It’s important the complaint is acted on immediately and follow-up is therefore essential. When responding to dissatisfied customers, it’s far better to use the phone rather than email however a quick email to say you’re looking into the problems will bide you time and allow for things to calm down.
Perhaps there is no such thing as a difficult customer and perhaps all complaining customers can be turned into valuable customers for the future.
However, cashflow must always remain a prominent consideration and should influence the degree to which you are prepared to provide work without charge.
Businesses need to consider each client on an individual basis to establish whether you should do some work for free or not.
When you’re making a presentation to a client you need to factor in the cost burden within the presentation and make your expectations clear.
It’s all about business respect and if the potential client respects you they will expect to be charged for something or at the very least for third party costs.
Only spend a limited amount of time on work that you’re not being paid for and don’t get too involved in giving too much away.
Say you will create an invoice, but if you are successful at winning the piece of work you can credit the initial work as a gesture of goodwill.
Remember always in business: Turnover is vanity, profit is sanity but cash is reality.
Business owners commonly find themselves unable to delegate tasks because of the illusion that they are the only ones who can do the job properly. But if SMEs are to succeed in the long-term, entrepreneurs need to occasionally take a back step to allow their employees to drive business forward.
Business owners should prevent themselves from falling into the trap of micro-managing every aspect of their organisation. Staff should be allowed to flourish and get on with it.
Because if you check everything your employees do before long they will be less careful and you have given yourself another job.
Entrepreneurs need to consider how it would feel if every time they did something, it was pulled to bits by the boss.
Dispose of the tasks you don’t want to do by outsourcing non-key resources such as health and safety, administrative roles or accountancy. Also, hiring a good office manager can take away a large part of the burden, you can specialise on strategy and the important issues affecting your business .
The key is managing by exception rather than managing everything.
Build a system whereby you can spot check, but do not interfere with simple processes.
Many owners see business plans as merely a way of acquiring funding. They do not recognise the power of the business plan in steering your business forward many months or even years down the line.
What’s the point of a business plan?
A business plan serves a critical purpose in any organisation. It focuses your efforts,
enabling you to spot potential pitfalls. It also allows you to set realistic targets and to trace your growth.
Good business plans enable you to structure and monitor your business, as well as recruit the right level and calibre of staff.
However, even when written, most business plans tend to end up in someone’s drawer. This completely defeats the original purpose and will not serve any benefit to your
Entrepreneurs need to communicate their business plans to their organisation and to their staff so that everyone is singing from the same hymn sheet. The document should
not be reserved for the eyes of management only – all employees should understand the opportunities and the threat to the business.
Businesses which are well-established tend to use a business plan every month to
realistically analyse whether or not they are on track. A business plan allows you to consider detailed market research in relation to your competitors so you can fully understand where your business is going.
The benefit of having it written in black and white is it focuses your mind. It’s also
extremely motivational to write. More importantly in a recessionary period it allows you to say no to certain opportunities which come your way.
If an offer is not exactly in line with your business plan you should say no as you can become sidetracked.
That said, no business plan is good if it’s too static or inflexible.
A business plan is a good way of making people in your business accountable. Business plans can be as simple as a single sheet of paper to focus your mind or as comprehensive as a 70-page report dealing with all strategic issues in a business.