Category: Cashflow & credit management

Cashflow and upfront payments – do not think you are richer than you are!

Having a second bank account inevitably means there’s less money in your main bank account and this is a great indicator of how profitable your business really is.

Cashflow and upfront payments should not be a problem.

But – in a business where you get paid upfront you have to be so careful to remember that costs and cash outflows will follow the cash inflows – so don’t spend all the money!

Surely upfront payments are cashflow paradise?

Ask the majority of businesses that sell on credit whether they would love to get paid upfront and of course they will all say yes.

Positive cashflow, less time and money spent on chasing debtors, very low risk of bad debts – what’s not to like?

But too many businesses fail to manage this position well enough and can fail as a result.

Do not think you are richer than you are

Let’s say you have a property refurbishment business and you insist on being paid steadily throughout the duration of a project. Obviously a sensible way to run your business.

But the danger is that you take too much of the money out of your business and forget that there will be costs from suppliers to be paid, VAT, tax on the profits etc.

Even worse, you might take your eye off the ball regarding costs and let them over-run. In this case your profit margin has gone and there is even more money due to leave your business. After you have already spent a lot of it!

It’s all too easy to think you are richer than you are and spend money that should be earmarked for other purposes.

What’s the answer?

There are two sensible things you can do:

  1. Ensure you recognise in your management accounts all of the costs related to the revenues you have invoiced
  2. Have a separate bank account where you keep money that you know has to be paid out – to suppliers, HMRC etc.

The second bank account is incredibly useful because inevitably it means there is less money in the main bank account and this is a great indicator of how profitable your business really is.

Cashflow is so important – we all know that.

But even where businesses get themselves into a very strong position through upfront payments from customers we still see too many fail to manage this position of strength and struggle when they should not.

Michael

Can we help your business with any aspect of bookkeeping, accounting and cashflow management? Please call us on 020 7125 0270 or email info@bluedotconsulting.co.uk

Related links:

Cashflow

Outsource your accounting and bookkeeping

Get paid quicker – 5 ways to avoid bad credit risks

www.bluedotconsulting.co.uk

The VAT payment you were worrying about? That got paid last week!

It’s taken a year of concentrating on bookkeeping and cashflow to get to this point but Maggie is now so on top of her business finances she didn’t even notice she’d paid her VAT.

A stress-free VAT payment – now there’s a thing of beauty.

How did we get here?

To be fair, when we started working with Maggie her business finances were a complete mess and she was running around like a headless chicken trying to run the business and keep on top of the finances.

So we took over all the bookkeeping and financial management and organised:

  • daily bookkeeping for all sales and bank transactions
  • Maggie sending all her suppliers’ invoices to AutoEntry so we could get them all accounted for
  • useful financial reports in the bookkeeping software, accessible to all
  • monthly bank reconciliations
  • a simple cashflow model and four-month forecast
  • weekly finance calls with Maggie

And one year later – Maggie knows exactly where her business stands financially.

Maggie can:

  • plan ahead knowing she has the funds to grow her business
  • make sensible decisions about pricing
  • see the effect on her profit of marketing initiatives
  • concentrate fully on running her business
  • sleep at night

Can Blue Dot Consulting help your business?

What we did for Maggie we can do with you for your business.

The starting point is to get the bookkeeping going properly in a way that fits your business, organised to produce useful financial reports that tell you how you’re doing.

It can take a bit of time but it’s certainly worth the investment.

Sounds useful?

Let’s have a free-of-charge chat about your business – call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk

Michael

Related links:

Bookkeeping for business

This is bookkeeping in the 21st century

Profitability and cashflow

© Blue Dot Consulting Limited

Chartered Accountants – Bedford House, Fulham Green, London, SW6 3JW

Credit management – A sale is a gift until it’s paid for (part 1)

Many credit rating agencies can supply marketing lists pre-screened to contain only prospects with a decent credit rating. So, there really is no excuse to sell to high risk prospects in the first place.

Successful credit management should be front and centre for all businesses, irrespective of the wider economic circumstances.

Getting paid on time remains one of the biggest and most frustrating problems for business owners and these blogs set out a comprehensive framework for credit management to help you lower your risk and put more money in your bank account.

This first one looks at how to establish a credit policy and why it’s better to prevent than to have to cure credit management problems.

Establish a credit management policy for your business

Your credit management policy has to apply across the entire business, just as a smoking policy or a pension policy would. All areas of your business need to buy in to it and apply it otherwise it simply won’t work.

The policy should cover areas such as:

  • Standard credit terms as part of your terms of trade
  • Credit vetting prospects and existing clients
  • Pricing
  • Prompt raising of invoices
  • Credit insurance
  • Early payment discounts, interest on late payments
  • Putting slow payers on STOP
  • Collection procedures and targets
  • Legal recourse

It’s sensible to review the policy from time to time but more importantly it’s vital to ensure that your policy is being applied consistently across your prospects and customer base.

Include your policy on your website.

 Prevention is better than cure

There are several steps that can be taken to reduce the credit risk before a sale is made.

Firstly, consider checking the credit worthiness of your prospects before you go too far through the sale process.

There are several credit rating agencies in the UK (Creditsafe and Experian are two examples) and they will supply you with online credit reports and ratings which will help you to determine whether you want to proceed with a given prospect.

Many credit rating agencies can supply marketing lists pre-screened to contain only prospects with a decent credit rating. So, there really is no excuse to sell to high risk prospects in the first place.

Moving forward through the sales cycle, you can subscribe to online monitoring services where the credit agency will notify you of changes to your clients’ credit ratings.

Agreement in writing

It pays to have clear and unambiguous terms and conditions and to get these agreed in writing.

It almost goes without saying that prices and payment terms should be set out somewhere in the documentation, but sometimes these are dealt with separately, which is an opportunity to lose sight of the payment terms, so be careful.

In a perfect world neither you nor your customer will ever have to blow the dust off the T&Cs, subject to periodic review, but it’s important to know they are signed and on file if you need them.

Strangely, this is an area that businesses can be lax on and so it’s important that the chief executive leads from the front and ensures T&Cs are always in place before goods or services are delivered.

A useful online resource for T&Cs is NetLawMan. You can start with one of their contracts and adapt it to your own business before running it by your lawyer if you need to.

Hopefully you now have some thoughts about where to start and where you can go for help. If you’d like some one-to-one advice on credit control and management, please give us a call at Blue Dot Consulting on 020 7125 0270 or email info@bluedotconsulting.co.uk

Michael

Related links:

Profitability and cashflow

Get paid quicker – 5 tips to improve your sales invoices

How to build a simple cashflow model and keep it running

Get paid quicker – 5 tips to improve your sales invoices

I think sending a URL link rather than a PDF is nuts! Why make it more difficult for your customer to deal with your invoice?

To get paid quicker, you have to get your invoices out to customers in good time and in good shape otherwise you risk ongoing cashflow difficulties that could hurt your business.

We recently saw a business where, because of system changes, one month’s invoices to clients went out very late and they almost failed to be able to pay their staff at the end of the next month.

It seems that however well-organised you are with invoicing, even a small glitch can have a disproportionate effect on cashflow.

So, if sales invoicing is so important, how do you make sure you get paid quicker?

1. Get the basics right

Make sure you have an agreed contract or agreement with your customers and that it included terms of payment and, perhaps, a payment schedule if it is for a distinct project.

Are your invoices:

  • professional-looking, accurate (no surprises for the customer, errors can delay payment)
  • sent to the right person
  • correct for details such as Purchase Order number if required
  • sent out in good time.

If you know that your client requires two signatories on an invoice greater than £50,000 then why not send them two for £25,000?

Get the basics right first time, every time.

2. How to create invoices to get paid quicker

There are four common ways for a business to create sales invoices:

  • Use your accounting software. The creation of the invoice does the accounting at the same time, so there’s no duplication of effort.
  • Use a CRM system – in which case make sure you have software to send the invoices from your CRM system to your accounting software
  • Use a sales invoicing app
  • Word, Excel or similar. A spreadsheet is better because it will add things up and calculate VAT properly. However you do it, convert them to PDF before sending them so they can’t be changed.

However you create your invoices, make sure the basics are right.

3. How to send invoices

Invoices get sent electronically, no ifs, no buts.

There are two alternatives, one good, one bad.

The good alternative is to send your invoices as PDF attachments to emails, making sure your email goes to all parties that need to see it. Taking away yet another excuse not to be paid!

The bad alternative, but championed by some accounting software providers, is to send an email containing a URL link to your customer.

I think this is nuts! Why make it more difficult for your customer to deal with your invoice?

Sending the URL is simply creating a reason for your invoice not to be paid as it makes your customer have to do a bit more work which they might conveniently forget to do.

4. Make it easy to get paid quicker

Try to use a direct debit service such as GoCardless.

This will take away almost all of the pain of getting paid.

Sign up all new clients to pay by direct debit and be very wary of any prospect that won’t do so.

If direct debit is not an option then your invoices should contain the details of how you want to be paid.

Direct bank transfer, such as BACS, is best and therefore you MUST include your bank sort code and account number on the invoice.

If your client is overseas, further details such as your IBAN will be required and part of getting the basics right will have been to use the correct currency for the invoice in the first place.

Every sales invoice is part of your credit control process and it must help, not hinder being paid.

5. Systemise your sales invoicing process

Like many business processes, sales invoicing should be turned into a documented system that can be run in the same way every time and produce the same outputs. Make sure more than one person knows how to run the system so that holidays and staff changes don’t mean invoices are not produced.

Sales invoicing becomes more efficient, less prone to error and clients come to expect your invoices to arrive at the same time and in the same way each month, which helps you to get paid.

Where you send recurring invoices of the same amount to the same clients each month, use your accounting software to set up and email recurring transactions (e.g. memorised transactions in QuickBooks) so the job is done for you and not overlooked.

Also, your accounting software should be able to send automated chasing emails to customers that owe you money – but get on the phone as soon as an invoice is late!

Easy!

There’s no reason to be poor at sales invoicing and the positive impact on cashflow means that you have one less thing to worry about.

Michael

Related links:

How to improve cashflow and make more money

I stopped doing my books when I realised I was making them worse!

Profitability and cashflowhttps://bluedotconsulting.co.uk/service/profitability-and-cashflow/

How to improve cashflow and make more money

To keep cashflow grounded in reality, go backwards for six months to see what the actual cashflows have been before you go forwards and model the future.

Knowing how to improve cashflow is always important and as we continue to live and to trade in uncertain times, cashflow management is even more important.

We also face a very difficult banking climate which puts a huge premium on self-reliance, being the master of your own cashflow destiny and not having to look to your bank for funding.

So here are five ways to improve cashflow and make more money.

1. Cashflow model

Build a simple cashflow model in a spreadsheet, which might look a little like this:

Example of a cashflow model

Stay grounded in reality, go backwards for six months to see what the actual cashflows have been before you go forwards and model the future.

Update the model each month with the actual cashflows for last month and any modifications to what you think the next few months will bring.

Use the cashflow model to identify changes you can make across your business that will bring more money in.

If you are a borrower, share your cashflow model with your business bank manager early on so they can see the steps you are taking to manage cashflow and you can identify future pinch points and manage them together.

2. Credit management and control

If you offer credit to customers can you use a direct debit service such as GoCardless?

Credit management starts with trying not to market to customers who are bad credit risks or slow payers and ends with consistently getting paid in good time.

You have to pay attention to credit control because otherwise cashflow suffers, costs rise, stress increases and your business might fail.

We have a number of blogs on credit management that you might find useful.

3. Improve margins

The more profit you make from each sale, the more money you make. So, review your prices and your costs of sale to see where improvements can be made. Be competitive, but that is not necessarily the same as keeping prices low.

If every £100 of sales you make can generate an extra £5, how much more money will come into your business?

See our blog on profitable pricing.

4. Reduce overheads

How to improve cashflow – spend less money!

Every pound of overhead is a pound of cash that goes out of the door.

Review your overheads to make sure you are not spending more than necessary and also to ensure you are getting value for money spent.

5. Phase payments to creditors

Some payments, particularly quarterly ones like VAT, rent and lease payments, can fall to be paid at the same time, creating a difficult pinch point every three months.

Can you change the months in which these payments are made so they are phased more smoothly and put less pressure on your cashflow?

For example, you can you ask to change your VAT quarter to move the VAT payment to another monthly cycle.

By staying on top of your cashflow, you will be able to grow your businesses without relying on or borrowing as much money from your bank.

You earn more or pay less interest, you can re-invest the cash generated in growth or by rewarding key staff and you have more time to concentrate on running your business – doing what you should be doing!

Michael

Related links:

Cashflow

Why two bank accounts are better than one

Get paid quicker – 5 ways to avoid bad credit risks

Improve cashflow – our’s is a mess and I’m running around like a headless chicken

Poor cashflow is a symptom and a problem. We take a look at practical ways to improve your cashflow.

“I need to improve cashflow” – it’s the lifeblood of any business and most people running their own business will have found themselves thinking something like this at some stage.

What can be done?

Solutions are at hand. Take a deep breath and read on.

Cashflow model

There are two types of business:

  1. Those that don’t need a cashflow model
  2. All the rest

Most businesses are type 2 – they need a cashflow model.

These days there are several apps that will link to cloud accounting systems and produce cashflow forecasts.

Personally, I’d start off in Excel and keep it simple. Here’s an example of what your model might look like –

Example of a cashflow model

Go backwards to model actual cashflows before you forecast forward so your forecasts are anchored to reality. And keep your cashflow model up to date.

Other cashflow blogs:

Don’t bank on your bank for cashflow

A gory cashflow model is a useful cashflow model

Credit control

Get on top of credit control NOW!

Call the people who owe you larger sums of money and stop working with them until they pay.

Again, there are apps that will link to cloud accounting systems and manage credit control. And again, I’d get my processes and workflows organised and working effectively first before delegating credit control to a computer.

That said, look at GoCardless – an app that allows you to set up direct debits with your clients. GoCardless really is a game changer.

Remember – a sale is a gift until it’s paid for.

Other credit control blogs:

Workflow

So much of cashflow management and credit control is about being organised and having efficient workflows. For example:

  • Agreeing written contracts and price proposals
  • Delivering products and services on time, to the agreed standard
  • Getting invoices out as soon as possible
  • Keeping your accounts up to date so you know who owes you money and who you owe money to
  • Having a fixed payment run each month for suppliers so they know reliably when they will be paid

Much of which comes down to having efficient, up-to-date bookkeeping.

Have a look at our page on Workflow to see how doing things right can save you time and money.

Profitability

Are you selling at high enough prices to make a profit and produce positive cashflows?

If a business with £200k turnover increases its prices by 5% then it makes £10k more profit all of which ends up in the bank!

Improving profitability can have a huge impact on cashflow so why not test higher prices on some of your customers, products and services and apply what you learn across your business?

Profitability blogs:

Cost control

If your business is spending too much money and perhaps making a loss then stem the tide now.

Cut costs, including what you take out yourself, and get the business back in to profit as a matter of urgency and survival.

Even if your business is making money, it doesn’t hurt to review your cost base. Some costs embed themselves in companies – fossilised costs – and need to be found and questioned from time to time.

Go on a fossil hunt

Have you got the wrong clients?

Too many businesses tie themselves in knots by over-servicing and under-pricing their work. There can be many justifications for this, rapid growth being the most common.

But in the longer term, if your clients are not profitable and are getting in the way of more profitable opportunities then they are the wrong clients.

Renegotiate their prices and don’t worry if they leave.

Here’s a salutary tale – I can’t have the business I want because of the business I’ve got!

Poor cashflow is both a problem and a symptom. It also has solutions.

We’re accountants in South West London and if you think we can help your business cashflow give us a call on 020 7125 0270 or email me at info@bluedotconsulting.co.uk.

Michael

Related links:

Cashflow

Winter is coming – be prepared!

Improve profitability – in five simple steps

Blue Dot Consulting Limited

How to build a simple cashflow model and keep it running

At the time of writing this blog, Molly’s cashflow model has been running for nine months and she’s become excellent at forecasting, managing and improving her cashflow and her profitability.

If your business needs a cashflow model then take two minutes to see how we go about building a simple, useful model and keep it going for as long as it’s helpful.

Press play and also use pause as there’s a lot to take in on some of the pages.

Keep your cashflow model up to date

As you can see in the video, getting your bookkeeping up to date is an essential building block as is keeping it up to date.

At the start of the new month we update the cashflow model for the receipts and payments that occurred last month and make sure the closing balance in the cashflow model agrees to the reconciled bank balance(s) in the accounting software.

Then we discuss with the client what is likely to happen over the next three or four months.

The primary focus is on sales and payments by debtors. Then we look at the outgoings.

Only then can we see if there will be any problems to navigate, quarterly pinch points, and we can put solutions in place.

Forewarned is forearmed!

Pro tip: we rarely look beyond the next three or four months in the forecast. The sunlit uplands of a year down the line can take care of themselves but you won’t reach them if you can’t navigate the next three or four months.

How a cashflow model improves cashflow

Firstly, if you can measure something then you can improve it. So, simply having a cashflow model at all will focus attention on cashflow issues and how to solve them.

The areas to look at for improvement are typically:

  • Profitability – making more money from every sale will improve cashflow
  • Credit control – improve your debt collection so you receive payments from debtors sooner and stop selling on credit to poor payers
  • Have one creditors payment run a month – this helps you to set a target for sales and debt collection. Also, your suppliers will get used to a reliable pattern of payments from you which will be very helpful
  • Agree phased payment terms with suppliers if you need to and make sure you stick to them
  • Cut costs to save money and conserve cash

All these measures can improve cashflow and you can see the effect of them very quickly.

Practice makes perfect. At the time of writing this blog, Molly’s cashflow model has been running for nine months.

The financial management of her business has improved beyond recognition and Molly has become very sure-footed at forecasting, managing and improving her cashflow and her profitability.

History can repeat itself. As time goes by you build up a month by month cashflow history which becomes ever more useful and is a great reference point, particularly for a seasonal business.

How can Blue Dot Consulting help with your cashflow?

Quite simply, we know what to do and we can work with you to get your cashflow model in place very quickly, as well as bringing your bookkeeping up to the standard your business needs.

No bells, no whistles, no fancy graphs or apps – just a cashflow model that works for you.

Let’s have a free-of-charge chat about your business – call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk

Michael

Related links:

Ten ways to get paid on time

Why two bank accounts are better than one

Bookkeeping for business

© Blue Dot Consulting Limited

Chartered Accountants – Bedford House, Fulham Green, London, SW6 3JW

Why two bank accounts are better than one

Your main bank account will certainly look to be short of money. But that’s partly the point!

Running two bank accounts puts a massive focus on cashflow and making more money.

It’s not always easy.

But it shines an objective light on profit improvement and should mean you always have the money put to one side to make those chunky payments such as VAT, rent, PAYE, corporation tax, bonuses and dividends.

More money in the bank and less stress. What’s not to like?

Where to start with two bank accounts?

Every week set aside in the new bank account as much money as you need in order to make tax payments.

It’s simple – VAT is at 20% and Corporation Tax is between 19% – 25%, so if you put aside 40% of all the money that comes in from customers during the week then you’ll always have enough money to pay these taxes when they fall due.

Of course, you reclaim VAT on purchases and you pay Corporation Tax on profits, not on sales, so maybe 40% is a little high.

Perhaps 25 – 30% of the money collected from customers is a better starting point. Set up a weekly automated transfer or, if you use Starling Bank, you can set up “savings spaces”.

Over time the second bank account gradually builds up a decent balance and each quarter when you come to pay VAT and nine months after your year-end when you have to pay Corporation Tax, there’s no panic, you know the money is there.

Ideally there will still be money left over.

But isn’t the main account short of money?

Your main bank account will certainly have less money in it. But that’s partly the point!

The second very powerful benefit coming from the exercise is that your main bank account should have a lower balance and this should act as a trigger to do something about it.

The target you’re aiming for is that you can comfortably pay your staff, suppliers and the monthly PAYE / NI payment without needing to bring money back in from the second account.

Of course the second account is there as a safety net but you don’t really want to be using it for routine monthly payments.

Actions to improve cashflow

You can boost the balance of your main bank account through a combination of three things:

  • Increase your margins and profitability
  • Improve credit control
  • Ask your clients to pay by direct debit
  • Reduce spending until you can afford to spend more – including your own drawings from the business

If you succeed with these measures then you’re on the way to a really sound, profitable, cash-generative business.

And isn’t that what you’re after?

Can Blue Dot Consulting help you with cashflow?

There are several ways we help businesses with cashflow.

  • Encourage them to have two bank accounts and help them hold their nerve along the way
  • Build and maintain a cashflow model that looks backwards as well as forwards so it’s anchored in the real world and shows the road ahead
  • Make sure their bookkeeping is complete, accurate and up to date. None of this works well without good bookkeeping
  • Profit improvement

Can we help you?

Call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk and let’s arrange a free, confidential meeting to discuss your business and the steps you could take to get on top of cashflow.

Michael

How do I get started?

In your online banking simply programme a weekly payment of, say, £500 to get started. Over time you can adjust the value of the weekly payment.

Can I bring the money back if I need to?

Yes you can. But try not to. Two bank accounts really is a no-pain-no-gain initiative but the gains are so worthwhile.

How easy is it to implement some of the other cashflow improvement ideas?

There may be some tough conversations with customers and suppliers but provided you’re able to make changes you’ll soon start to see improvements in your financial performance and hopefully stress levels will reduce.

Related links:

Cashflow

Cashflow and upfront payments – don’t think you’re richer than you are

Don’t bank on your bank for cashflow

How to use QuickBooks to get paid quicker

We can take you through all the steps from invoicing to reporting and help you automate as much as possible so QuickBooks does the heavy lifting.

Late payment is a problem for too many businesses. But if you’re a QuickBooks user there are tools in the product that can help you get paid quicker.

But before we look at QB, here are two things you could do immediately to speed up payments in the future:

  • Use a direct debit service such as GoCardless and be wary of any customers who won’t sign up to pay by direct debit. The interface between GoCardless and QuickBooks is excellent, by the way
  • Take extra care to identify potential bad payers and don’t sell to them in the first place

Why credit control matters for your business

“A sale is a gift until it’s paid for” is a great maxim to spur you on to get paid on time.

Businesses run much more smoothly if cashflow is positive and they fail if they run out of money. Getting paid on time is a big part of having a strong cashflow and the benefits include:

  • less stress about paying suppliers and staff on time
  • low or no costs of borrowing which improves profit
  • having funds available to invest in new products, services and markets
  • you can pay yourself more!

It makes sense to get paid quicker so, if you’re a QuickBooks user what tools are available?

Invoicing in QuickBooks

Raise all your invoices promptly, accurately and send them as emails with the PDF document as an attachment to make them easier for your customer to process.

There are various settings you can use (from the company cog in the top-right corner) to enhance your invoices:

  • preferred payment terms (e.g. 30 days)
  • include your bank details on the face of your invoice
  • default delivery method
  • customise the email message when your invoices are sent

Pro tip: You can set up invoicing to be recurring if you send the same value invoice to the same customer every month. Recurring invoices can be emailed automatically on the same date each month.

Automated payment reminders

Switch on automatic payment reminders (from the company cog in the top-right corner).

You can create up to three automatic reminders to be sent to debtors, choosing the timing and the content of the emails to suit your business.

For example, you could time yours to go out ten days BEFORE the due date and five and ten days AFTER the due date with an email message that becomes progressively tougher.

Pro tip: Make sure you include your bank details in the email text and make sure your customer details are set up to include, where you can, a first name as this can be pulled in to the automated emails.

See who owes you money with credit management reports

QuickBooks has twelve standard reports to help you get paid quicker.

Take a look at them to see which ones will be helpful then customise the useful ones and save them as Custom Reports. Customisation lets you:

  • Change ALL reports so they start with the largest invoice / debtor balance at the top and the smallest (which could be negative) at the bottom
  • Display all negative values in (red and in brackets) so they jump off the screen at you
  • Edit the report title so it’s immediately clear what it’s about (“Debtors list” instead of “A/R Ageing Summary Report”)

In the Related Links at the bottom of the blog are two great examples of how to customise QuickBooks reports to help you get paid quicker.

Pro tip: You can schedule reports to be emailed to different people in your business so send the credit management reports to the management team and to everyone who can help chase customers for payment.

How Blue Dot Consulting helps clients with QuickBooks and getting paid quicker

We’ve been using QuickBooks for over twenty years and have helped scores of businesses make the best use of it for their bookkeeping, financial management and, yes, credit control.

We can take you through all the steps mentioned here from invoicing to reporting and help you automate as much as possible so QuickBooks does the heavy lifting.

On our half-day QuickBooks training sessions we work with QB users on their live QB file and show them how to use the functionality that best suits their business. We also focus on reports, how to customise them and share them across your organisation.

Let’s book you in! Call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk

Michael

People also ask:

Should I use credit control apps and add-ons such as Chaser?

Every business is different and will have a unique profile of customers to collect money from. Establish the credit control tools and workflows that are right for your business first and use the tools already available to you in your chosen accounting software.

Then, if an app or add-on would make everything more efficient, you can look at adopting one. And you know what it needs to do.

What about a good old-fashioned phone call?

Always chase your biggest debtors with phone calls. No ifs, no buts – get on the phone!

Do we need a cashflow model?

There are two types of business. Those that do NOT need a cashflow model and all the others! If you’re one of the others then get cracking as soon as you can. This blog might be a good place to start:

A gory cashflow model is a useful cashflow model – the bloodier the better

Related links:

Customer timeline report – a window into the soul of your customers

Create a bespoke Aged Creditors report in QuickBooks

Why two bank accounts are better than one

© Blue Dot Consulting Limited

Chartered Accountants – Bedford House, Fulham Green, London, SW6 3JW

We can’t send you your invoice because our accountants are so behind with processing direct debits

Normally I’m delighted to hear that a business is getting paid by direct debit because DD is the silver bullet of credit control.

But when I heard a senior manager in XYZ Limited say this about their invoicing and their accountants, you could have knocked me down with a feather!

So, let’s see how they could have avoided getting into this mess in the first place.

Raise your sales invoices as soon as you can

Every business needs to raise its sales invoices as soon as it can. Make sure they are:

  • correctly describing the goods / services sold and are correctly priced
  • addressed to the correct person and contain a PO number if required
  • sent by email – ideally as a PDF not as a link. Why make it difficult for your customer?
  • accounted for as soon as possible if they’re not raised in your accounting software

Do this and you know how your business is performing from a sales perspective and you know how much money you are owed.

Get cracking with credit control straight away

Credit control differs for every business but however you go about credit control get started straight away so your invoices have the best chance of being paid on time.

This blog isn’t about credit control but there are a couple of links at the end which you might find helpful if you’re a bit rusty.

This blog doesn’t need to be about credit control because XYZ Limited gets paid by direct debit!

What could have been done differently?

It so happens that we use the same direct debit provider as XYZ Limited and this is how we would have gone about things.

The first step is to link the direct debit service to your accounting software.

As new clients come on board you send them a direct debit mandate to complete, stating your payment terms clearly so the client knows when their payments to you will leave their account.

Pro tip: If a client won’t sign up to direct debit you should seriously consider not working with them as they could well turn out to be a bad credit risk. And who needs that?

Raise your invoice, using the agreed payment terms, and send it to your client.

Sit back, relax and you’ll be paid on time. And if you use the combination of DD provider and accounting software that we use, the accounting for the payment will be done automatically.

Bookkeeping in the 21st century

There’s a link below to a blog about this.

Essentially we live in an age in which all sorts of online platforms exist for making sales and receiving customer payments.

This is generally a good thing but it does require businesses, bookkeepers and accountants to know what they’re doing and walk through every step of the sales process, from order to payment, making sure everything happens in the right order and is working correctly.

You establish workflows that work and scale from there.

It seems that XYZ Limited and their accountants have somehow tied themselves up in knots with a very visible outcome – XYZ’s clients aren’t getting their invoices even though they have made their payments.

Not a good look for XYZ Limited!

Workflows, accounting, getting paid – can we help?

Let’s have a free-of-charge chat about your business – call Michael Austin on 020 7125 0270 or email info@bluedotconsulting.co.uk

Michael

Related links:

This is bookkeeping in the 21st century

Five tips to improve your sales invoicing

Getting paid on time – your company is NOT a source of alternative finance!

© Blue Dot Consulting Limited

Chartered Accountants – Bedford House, Fulham Green, London, SW6 3JW