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Blog posts written on Tuesday March 2018
Posted Tuesday Tuesday, March 13, 2018 by Administrator
No matter if you are starting an agency when cash and cash flow can be major issues. Or, slightly more difficult if you are already running an agency wanting to improve profitability. There are number of steps that can considerably improve your cash flow and consequential the bottom line.
Do’s and don’ts simple rules work to ensure you borrow the minimum amount of money for the minimum time.
- Don’t spend it if you don’t have to. Sure you have to have somewhere to work, but it does not have to be rented office space. Many very successful companies started in garages, bedrooms or on the kitchen table.
- Don’t spend it if you don’t have to. This means an expensive web site. You need a web site but you can get one for a few pounds as long as you steer clear of WordPress you should be ok. Make sure your web site is secure: one of those padlock things (it has be secure to get good links).
- Don’t spend it if you don’t have to. This means not committing to some expensive company setup service or one with hidden future costs. From the gov.uk web site “It costs £12 and can be paid by debit or credit card or Paypal account. Your company is usually registered within 24 hours.”
- Don’t spend it if you don’t have to. This means not committing to some expensive loan, factoring or payroll service with a low headline rate but much higher APR (what you actually pay for every day you borrow: the bottom line). Borrow as little money as you really need for as short a possible time. Banks are quite good at flexible loans.
- Don’t borrow if you don’t have to: Sure you need to bridge the gap between paying your staff / ltd company employees and getting your invoices paid. If you can reduce this gap from a month to two weeks or even a week then you can halve or quarter your interest costs.
- Do have an invoice that includes all necessary information: you must have the word “Invoice” clearly displayed. It must have a unique identification number, your correct Company Name and Address, phone number and email. The Customer’s correct invoice address and usually an Fao line (for attention of), an Invoice date, clear itemised costing of the services supplied: the employee’s name, shift date, location, times, rate bands, detailed expenses and supplemental charges and reference to your terms and conditions. Bank details (account number sort code, bank name) payment period.
- Do make clear your payment period terms when you negotiate any contract of staff supply. So what is a reasonable period for payment? Before electronic banking and postal mail, 30 days was considered standard. Don't live in the last century. With modern invoicing systems such as ours then the invoice can arrive at the customer within a few seconds and payment is at worst 3 days via the banking system. So reasonably 14 days is entirely adequate. However, there is no reason why you should not go for 7 days as with our system you can invoice on any day of the week to coincide with the customer’s accounts department. In fact it appears that the majority of small businesses have 14 days or less as a limit in their terms and most request payment in 7 days. So your customers may profess surprise...stick to your guns.
- Do try have a friendly meet with the customer’s Accounts department (you have met the customer during contract negotiations) if you can, or at very least call them to introduce yourself so “any issues and we will be happy to resolve them quickly for you” to establish a “helpful” bond.
- Do (courteously) check that the accounts have received the invoice and they are happy with it for the first few weeks, explaining that as your system is new….etc.
- Do (courteously) check that the accounts have received the invoice and they are happy with it the first time it is late (some companies start of promptly and then slow down). A study showed that typically over 50% of small businesses suffer late payment and a third are overdue by more than 2 weeks. Politely argue your case: are they unhappy with the staff you supply? Are your charges competitive? Point out that to retain those staff and keep those costs, you need to pay your staff promptly, not incur interest charges to pass on (to them) and you are not a bank!
It goes almost without saying: invest in low cost software (ours) that helps you do the most tasks so you can make time for taking a step back and for life!
Links that may help
Simple step by step guide to limited company formation by the guys that write the rule book
Business discussion on invoicing period in your Ts & Cs
The Guardian how to invoice
The Prompt Payment Code
The Government's prompt payment policy
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