PREVIOUS ARTICLENEXT ARTICLE
MISC
By 23 March 2018 | Categories: Misc

0

VIEWING PAGE 1 OF 1

March business news sponsored by:

By Charles Pittaway, managing director at Sage Pay

Late payments, bad debt and unexpected expenses are just some reasons why small businesses run into cash flow problems, which can impact their sustainability and profitability.

A recent study by Sage – ‘Late Payments: The Domino Effect’ – found that 15% of invoices in South Africa are paid late, while more than 88% of payments due to Small & Medium Business’s are never made or are made so late that businesses are forced to write them off as bad debt.

When small businesses aren’t paid, they can’t pay salaries or their own suppliers and have to delay investments into the growth of their businesses.

One way small businesses can cushion themselves against the impact of late payments is to maximise their cash flow and cut costs.

Here are some ways to do that:

· Don’t put all your eggs in one basket

Try not to rely too heavily on a single customer or client for the bulk of your income, especially if they are notorious for paying late. Ensure you’re getting revenue from a number of different sources.

· Stay on top of admin

Sage’s Late Payments study found that small businesses spend an average of 15 days following-up on payments. Cloud-based accounting solutions automate a lot of this function by sending reminders on overdue accounts, ensuring invoices are rendered correctly and, therefore, not rejected, and reconcile with your bank account to give you complete visibility into your cash flow. Make sure that you’re sending invoices to the right person and that you have clearly-defined payment terms and conditions, including penalties for late payments.

· Offer a variety of payment options and discounts

Mobile payment solutions, like apps and card readers, allow customers to pay on the spot and improve the customer experience. Offer discounts to debtors who settle their accounts early and run credit checks on customers before offering payment terms.

· Get on good terms with financers

Establish a line of credit with your bank before you need it. This allows you to build up a credit record, negotiate lower interest rates and gives you immediate access to funding when you run into cash flow problems.

· Manage working capital

Have enough stock on hand to cover demand but not too much stock, which could tie up cash.

· Employ a dedicated resource

The Late Payments study found that 24% of small businesses do not have a dedicated resource for chasing payments, while 13% don’t have the time to do it themselves. Yet, having someone to focus on collecting money can drastically improve your cash flow.

Every small business should have some money in the bank to protect against late payments and slow months. Having cash in reserve will help you to fund your business’ growth, meet your own payment deadlines and avoid penalties.

VIEWING PAGE 1 OF 1

USER COMMENTS

Read
Magazine Online
TechSmart.co.za is South Africa's leading magazine for tech product reviews, tech news, videos, tech specs and gadgets.
Start reading now >
Download latest issue

Have Your Say


What new tech or developments are you most anticipating this year?
New smartphone announcements (43 votes)
Technological breakthroughs (27 votes)
Launch of new consoles, or notebooks (14 votes)
Innovative Artificial Intelligence solutions (27 votes)
Biotechnology or medical advancements (21 votes)
Better business applications (132 votes)