As 2016 draws to a close you might spend a bit of time reflecting on the year that was and what this means for your business.
Questions on your business growth and your bottom line might come up. If your accountant was not already on your back about it, questions on the amount of people and businesses that owe you money might also be raised. With January being a month notoriously bad for cash flow, such questions seem fitting as the collective value of monies that remain owed from within the last year, leave you unable to kick off the new year in full swing.
Whilst we can certainly help businesses recover debts, we also think it is worth looking into why there are so many debts in the first place. If you use materials or incur any fees in undertaking work for someone, it is vital that you at least obtain that amount upfront. There is nothing worse than not getting paid for a job and then having to satisfy your suppliers out of your own pocket. You should also consider if there is anything further you can request upfront, or, can you make sure you have payment in full before you (for example) install the hot water system, or, hand over the client’s tax return refund? Although it sounds crazy, think of other businesses who generally have no client debts – when you get your haircut, can you pay for it 14 days later? Can you pay for your new car later on? Well sort of – if you arrange finance! Which leads to the next point. If you are offering a bigger ticket item, like an air conditioner, can you use a third party to offer finance? That way you get paid upfront. You may even attract a larger market share if your competitors don’t offer finance arrangements.
We often get feedback from clients that find their own customers are unwilling to pay much upfront, in case there are problems with the quality of work, or if they worry you will pocket the money and flee to Bali in the middle of the night. To provide assurance to them, why not have terms and conditions that set out how much of a deposit you require and when the balance is due? You can also cover when a customer can cancel their request and what type of warranty you will give. It could even include interest on any late payments. Increasingly we are finding terms and conditions that require a director to personally guarantee their company’s debts (and lease) as well, which can give you further options if a company owes you money and subsequently goes into liquidation. If there are any disagreements between you and the customer, you now have a starting place that should set out what you agreed to do and what they agreed to do. Terms and conditions are a vital tool in improving communication between yourself and your customer and can also help get more payments in, quicker, so it is better for your cash flow as well.
At Coutts Lawyers & Conveyancers we can draft your terms and conditions and assist with debt recovery work too. Improve your business cashflow with some help from Coutts.