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.

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Unpaid debts

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.

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