It’s all too easy to fall into the trap of letting suppliers get behind on payments when establishing your business but to give your business the best chance at success you need to ensure cashflow is smooth. Here are some easy strategies to avoid the stress caused by late payments. - Ben Loffhagen, Relationship Manager, ANZ Business & Agri, ANZ

Managing cash flow is vital for the success of any small business. Ensuring customers promptly pay invoices can make a significant difference in financial stability and growth opportunities.

Here are five key strategies to help your business get paid on time:

1. Establish clear payment procedures

Implementing solid payment rules and systems can prevent issues before they arise. This includes being selective about offering credit. Conduct credit checks, have customers complete a credit application form, and make sure your terms of trade are clear. For example, consider provisions for interest on late payments and collection costs. These steps ensure your payment terms are understood upfront.

2. Use an efficient invoicing system

An efficient invoicing process is crucial to speeding up payments. Send invoices immediately after providing a product or service. Where possible, email invoices to make delivery faster and easier. Automated systems can simplify reminders, and you could consider shorter payment terms, such as seven days, to improve cash flow.

3. Promptly follow up on late payments

Chasing late payments may be uncomfortable, but it’s essential to act quickly. The longer an invoice goes unpaid, the harder it becomes to collect. Stick to your terms of trade and respond to overdue accounts promptly. If necessary, suspend credit or services until the outstanding balance is cleared.

4. Set debt reduction targets

Keeping track of your debtors is an effective way to manage cash flow. Calculate the average age of your unpaid invoices and establish goals to reduce it. For instance, if your current average is 55 days, aim to decrease it to 40 days. Regular monitoring and target-setting will encourage more efficient debt collection habits.

5. Avoid common pitfalls

Be cautious of common cash flow pitfalls. Large orders can strain resources if payments are delayed. Consider requesting deposits or progress payments for big projects. Diversify your client base to avoid over-reliance on one major customer. Additionally, new businesses should be wary of taking on customers with poor credit histories.

By implementing these strategies, your small business can minimise late payments and maintain a healthier cash flow.

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5 tips for small businesses to get paid promptly