Managing Business Finances
Effective financial management is essential to the long-term success of any business. Robust financial processes can help you to avoid and address common challenges.
Avoid cash flow problems
There are many reasons why your business may face a cash crisis, and it is crucial to understand the factors that can cause cash flow problems.
Common causes of cash flow problems include:
- Late payment.
- A key customer becomes insolvent.
- Insufficient working capital.
- Poor financial planning.
The key ways to reduce cash flow problems include:
- Adopting tight credit control procedures.
- Checking that customers are creditworthy.
- Offering incentives for early payment.
- Making it as simple as possible for customers to pay.
- Set up an overdraft facility.
- Negotiate part-payment in advance for large orders or big projects.
- Negotiate better credit terms with suppliers.
No matter how efficient your credit control procedures are, at some point, you may have a customer who has failed to pay an invoice. In these circumstances, there are several different types of action that you can take to secure payment of the debt.
- Mediation and arbitration.
- Debt recovery agency.
- The Small Business Commissioner.
- Court proceedings.
- Insolvency proceedings.