26 Apr Small Business Finances – Staying up-to-date with your accounts
One of the biggest problems for a small business is cash flow, which means that you need to keep your accounting and finances up to date. It is no secret that many businesses fail simply through a lack of capital, leaving them floundering with a mountain of unpaid bills and no other option but to close their doors.
One of the factors that are seen too often, when a small business fails, is a backlog of unpaid invoices. We can only hypothesise that if a business had followed up these accounts in a timely manner, that all things being equal, this overdue money might have made a difference to the outcome.
All of this means that when a small business drops the ball in the accounting department and their finances are no longer under control, you can hear the death knells echoing in the distance. So what can you do? If your small business has a number of unpaid invoices, how can you approach this situation and fix the problem, before it becomes a serious issue?
The first step is to organise your finances, starting with the accounting department. Even if you handle all of the accounting yourself, there are steps that you can put in place to help prevent unpaid invoices stacking up and to recover any unpaid invoices.
Step 1 – Organise your accounting by clarifying the terms of your invoices
Sometimes there is nothing you can do to prevent a customer ignoring your invoices. The best your accounting department can do is to clarify the terms on your invoices, hoping to minimise the problem. This involves complete transparency about due dates so that there is no misunderstanding about when the invoice needs to be paid.
As a small business owner, it might be best for you to speak to a lawyer who can ensure that the wording on your invoices is correct. There should be no doubt in your customer’s mind that there are legal ramifications for non-payment by the due date.
Another strategy you can use to reduce the money you need to recover is for your accounting department to require a deposit or part payment before the work commences. This not only gives you an upfront part payment (improving your day to day finances), but it also tends to confirm the order in your customer’s mind, making them less inclined to refuse payment at the completion of the order.
Step 2 – Organise your finances by recovering what’s owed
It is not unusual for a small business to be busy and disorganised, losing track of their finances and leaving their accounting department in a frazzle. This can cause your invoice to become lost in a morass of unpaid invoices, for no other reason than simple disorganisation or oversight.
All it might take for your overdue invoices to be paid is a quick email, followed by a profuse apology and the money is in your bank the same day. If you don’t receive a response from your email, then make a polite phone call to their accounting department, reminding them of their unpaid invoice and requesting a payment date – in writing.
Another option you can try is to send an SMS reminder to request that they pay the overdue amount, but usually, an email or a phone call will resolve the problem to your satisfaction. You also have the option of offering them a payment plan, as this gives a customer more time to pay the invoice in full, particularly if they are having difficulties with their finances.
If all else fails, then you will need to seek legal advice, issue a letter of demand and if this doesn’t resolve the issue, then take matters further. Patience, however, often pays off and more often than not, your customers will pay their overdue bills, eventually.
Need help with small business accounting, compliance services or any other financial advice? Contact our friendly team of advisors at Conrad Carlile today and we will be in touch to discuss your individual requirements.