Our training courses will be valuable to many businesses. We thought it would be useful however, to give some cash flow tips for particular types of businesses. These are our tips for cash flow, for tradesmen who deal with consumers.
Top Three Cash Flow Tips For Service Businesses
Services tend not to tie money up in stock but cash flow problems can be created in other ways. Below are what we believe the key considerations should be for service businesses, such as professional advisers, recruitment agents and creatives (designers, etc).
1. Don't Delay Raising An Invoice
It is tempting to leave invoicing to the month end. However, it helps if you invoice work as it gets done, if appropriate. If a piece of work is complete or no further work is likely for a period of time, it is best to invoice as soon as you can.
The sooner you invoice, the sooner the deadline for payment starts ticking. It is also best to invoice close to the time of carrying out the work, whilst the detail of the work and benefit received from it, is clear in the customer's mind.
2. Clear Payment Terms
If you make it clear to your customers when invoices fall due, there is a better chance of them making payment on time.
Research what the standard terms are in your industry. Maybe stick to those or see if you can justify more favourable terms so that you are paid quicker or perhaps even with some money upfront.
3. Interest On Overdue Invoices
If invoices do fall due, do not forget to use your entitlement to statutory interest and compensation. Whether you impose it or not is up to you. However, if you are doing business with another business you can add 8% above Bank of England base rate.
If dealing with consumers, make sure you put any interest you want to claim in your terms and conditions.