The initial shock of Covid left people and businesses reeling; the impact was as rapid as it was far-reaching, and overwhelming in some instances.
Cash flow is critical to the success of any business, of course, but managing debt wasn’t necessarily at the top of the priority list, not least because some people would have been reluctant to chase debt when we were all struggling to adapt. And who really believed that this crisis would continue to dominate our lives into a new year?
Despite the protracted uncertainty, effective debt recovery remains a viable means of increasing cashflow. For example:
A new client in the printing industry came to us at the height of the pandemic in June 2020. Over 50 instructions followed and we achieved a 91% pre-action recovery rate, despite the ongoing economic uncertainty.
So where should your focus be after almost a year of disruption?
- Creating a cash culture across the business is vital so that every member of staff is aware of the role they play.
- Understand your place in the supply chain: how vulnerable are you if one of your major clients falls, or if one of your own key suppliers fails to deliver? Keeping the cash flowing requires management in both directions – up and down the chain.
- Review payment performance of your key customers, so that you can immediately spot any changes that could indicate an early financial problem.
- Don’t extend unnecessary credit: you’re putting your own business at risk by extending credit lines to people that already owe you money or may struggle to pay.
- Delve into the detail and look at contract and payment terms in both directions; adjustments could be in your favour.
- Look at your billing and collection processes, make it easy and make it efficient with prompt invoicing, regular statements and follow-ups. And whilst it’s tempting to do everything electronically, sometimes picking up the phone might be all it takes.
Key to cash flow is keeping track of debt, and communicating with your clients and your suppliers. Don’t shy away from chasing payments, big or small, and keep an eye on the bigger picture so that things don’t get out of hand.
Of course there are legal avenues to recover unpaid debts which we can assist with, and we can advise on getting the right systems in place for your business. Please do get in touch if you’re looking for help.