June Is The Perfect Time To Fix It! This Is How! 
Common challenges for small businesses often centre around cash flow problems, trying to secure new leads and paying off debts. In fact, one of the most common reasons new businesses fail is due to inadequate cash flow or high cash use.
Most businesses at this early stage concentrate on their products or services, without putting extra thought into planning and implementing a proper credit collection system. Rather than risk heading down this path at all, cash flow problems can be avoided by proactively defining and implementing a simple credit control and debt management system early on. June is the perfect time to fix this. This is how!
By following 7 simple steps every small business can keep its cash flow liquid:
- Draft your Terms of Business with care and diligence, including an extensive section on Standard Payment Terms. This should cover late payment fees, interest and additional fees should the account requires debt collection. Include these Payment Terms on all invoices and statements.
- Thoroughly credit check all new credit applications. Often signs of bad debt are obvious prior to opening an account. Prepare steps and procedures that must be followed and complied with, such as seeking new customer consent to contact Credit Reporting Agencies.
- Plan, define and implement a functional credit and debt collection system that complies with the ASIC Debt Collecting Guidelines. Make sure you cover the following processes: credit granting, billings, collections, dispute & complaints handling and resolution, legal collections.
- Write a simple internal Manual on credit and debt collection processes and procedures, listing them in working order. By having a simple formal manual, you are set up for further development and education of potential new staff as your business grows.
- Delegate credit control and debt management to specifically allocated staff member/s who will follow the cycle in regular periods. In this case consistency and persistency pay off.
- Escalate debt collecting to legal as soon as your internal collection processes have been exhausted. The longer the account stays outstanding, the less likely it will be to collect it. One year old accounts have a very low collection success rate.
- Review your Credit Control and Debt Management System yearly to pinpoint areas for improvement and policies which need to be updated as your business develops.
Taking time to report, track and follow up unpaid accounts on a regular basis is critical to avoiding cash flow problems. Outsourcing a credit & debt collection specialist to help you put in place and implement your professional Credit Collecting System is even more beneficial: This will potentially save you time and money in the long term.
If you have any questions in relation to debt collection or cash flow management in general, please contact us.