Healthy cash flow is the life blood of every business, regardless of its size. It ensures that creditors and employees are paid on time, thereby protecting the business’s valuable reputation and ensuring that profit distributions are possible.
Cash flow problems generally has the most adverse impact on smaller businesses. To avoid these negative effects, having a sound debtor management strategy in place (as part of your cash flow management strategy) is key.
Prevention is better than cure, as litigation to collect outstanding monies may further strain an already distressed business.
Many businesses employ the services of consultants to check on consumer’s payment records and credit information before engaging them. The consumer should consent to this before such an investigation is embarked upon.
Knowing who you are contracting with is invaluable in order to facilitate the risk involved and contracting appropriately.
Even with the most sophisticated strategy in place, cash flow issues may arise if you are not ensuring that your credit controller collects payments in respect of outstanding invoices promptly.
In debt collection, we often refer to the” golden period” when collecting the money outside of court structures is most likely to be successful. This is ideally the first week after payment was due and generally no later than 30 days after it was due.