Overcoming cashflow problems
The challenge
Cashflow. I had a big deal that I wanted to land at the
beginning of this year but needed £1,500 to secure it. When I
approached the bank they would only lend it to me if I put my house
on the line. I was absolutely not willing to risk my house on such
a small overdraft.
I have learnt in the past that cashflow is always going to be a
problem for a small business, especially in the early stages of its
lifecycle.
The solution
Instead I raised the money from friends and family. Not only did
I secure the deal but I didn't have interest to pay either.
To overcome any cashflow problems more generally I have made
sure that I keep a good customer base. I have never felt the need
to offer discounts or even incentives to encourage customers to pay
on time because all it would take was a follow-up phone call. I
have consciously whittled down my clients to ensure that they are
reliable and trustworthy.
If clients have taken 90 days or longer to pay an outstanding
account, I send them a letter asking them to pay promptly or their
account will be limited to cash only accounts. I always follow up
with this, because I need to ensure that I have a reliable customer
which means reliable cashflow.
You do however need to be understanding on the size and
structure of the business you're dealing with as well. With many
larger companies it takes around 60 days for an order invoice to go
through their systems.
Key lesson
I would definitely suggest in investing in a good credit agency.
Look out for one that takes all aspects of the business into
consideration. Credit agencies will check out a business for you,
and make a decision on whether they are a safe client and likely to
be a good customer. This has often given me insight on a company
that I wouldn't have had in general dealings with them.
Top tip
Don't take anyone at face value. My best advice would be to be
wary of people trying to spin you a yarn. There have been many
times when clients have assured me that the 'cheque's in the mail,'
but it is best to be discerning about how a company or person might
portray themselves.
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