KEEP YOU BANK MANAGER HAPPY:
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AVOID THE CASHFLOW CRISIS
etVery few businesses are able to operate successfully on a cash-onthe-nail basis. Most will allow heir customers time to pay for the goods or services provided and will expect their suppliers to wait a reasonable period before their bills are settled.
Controlling these quite separate areas of credit facilities is a continuous process demanding considerable skills which are acquired by both training and experience.
We are all in business to earn money, and as no payment is due until the customer has been invoiced, it is important to ensure that the vital function of invoicing is performed promptly and not allowed to fall into arrears. The "I'll do that later" syndrome is all-too-easily applied in the areas which matter the most, particularly invoicing. Having invoiced the customer, the main problems arise when payment is not received by the due date. How do you go about winkling the money out of the reluctant payers? Too much pressure, inexpertly applied, could well lose you a useful customer — but the non-payers are using your money interest-free to finance their businesses while you are paying the bank high interest on your overdraft.
So press you must, but tread warily at first. A polite letter or phone call will often produce results and solve the problem. If not, a firmer letter insisting on immediate settlement but stopping short of threats is the next step. A touch of humour such as the rubber stamp depicting a little man shedding tears and wailing "payment overdue!" can be effective. The big stick can be wielded if necessary by advising the customer that his credit facility will be withdrawn unless payment is received by a specified date and future supplies will be on a cash-on-delivery basis only.
REPUTATION INTACT
Some customers may be tempted into prompt payment by the offer of cash discounts, but this can be expensive and it is often better to take a discount than to give one. Of course all businesses are debtors themselves as well as creditors and the other side of the coin involves your own efforts to delay payments to your suppliers for as long as possible. A sure way to improve your cash flow is to not pay your bills, but the benefits will be short-lived if your credit is curtailed and your reputation damaged.
So much depends on what licensing authorities like to call "good repute" that it would be foolish indeed to put your commercial reputation at stake by unreasonable delay in settling accounts. The solution lies in the skill and finesse observed in the deployment of available funds to the best advantage, while maintaining the flow of money inwards by discreet and finelyj't:lged pressure on the reluctant payers.
• by Frank Lewsey O Frank Lewsey, once a bank manager himself, understands the problems of working in the road haulage industry through his connections with E P Training Services of Esher in Surrey, which specialises in HGV and PSV driver training and CPC instruction courses.