Friday, 28 June 2013

How to Take Control of your Cash Flow

With British businesses being hung out to dry when it comes to the recurring issue of late payments, it’s no wonder that hopes continue to fade for recovery of the current financial climate. Legislation to reduce payment terms and bind in the contracted parties still doesn’t formally or legally exist, and has adversely affected the cash flows of businesses all across the UK.

A recent survey by BACS Payment Scheme found that 44% of SMEs are currently experiencing issues with late payment, waiting on average 38 days for payment after the agreed terms. With the recovery from the recession widely reported to be hinging on the prosperity of UK SMEs, these issues must be resolved before we continue to see more downward pressure on everyone’s margins.

So how can businesses become proactive towards handling payment issues? Signing up to the Prompt Payment Code, which is a government scheme of commitment to timely payment and encouragement of best practice between organisations and their suppliers, would be a good place to start. However, more can be done by individual businesses to implement the aims of the payment code.

How can this be achieved? Provided below is some guidance that will help your business improve its own financial position and speed up cash flow:
  • Commitment to the best payment practices outlined in the Prompt Payment Code will put pressure on large suppliers to change their buying behaviour and minimise the bargaining power they currently exert over SMEs.
  • Consolidation of payment services through a single provider will speed up settlement times and reduce the hassle of managing multiple relationships and reconciliations.
  • Selecting a merchant acquirer who prioritises prompt settlement of funds from card payments will enable your business to access those funds more quickly.
  • Using an electronic invoicing service can be far more efficient than traditional paper invoicing for both you and your customers to make and receive payments. Invoices can be settled instantly online, allowing your business to get paid faster.
  • Ensure that your business has the ability to accept payments through your customer’s preferred payment method. Electronic payments are fast becoming the norm, so it is important that you possess a variety of payment acceptance facilities.
Amending your businesses’ financial processes in conjunction with the aforementioned guidelines will boost your cash flow and inspire confidence in both your customers and suppliers. Certainty of payment is essential for staying afloat in this time of recovery, and will create numerous opportunities for growth throughout your supply chain. If you are to prevail through these rough economic times, your business must be proactive in creating a positive change in the way payments are handled and processed.

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