Below is a list of tips that will show you how to manage finances in your business and prepare you for any cash shortages.
1. Know your customer
- Check out the exact name and legal status of the business you are supplying. If it’s a sole trader or partnership, the proprietor or partners are personally liable, so make sure you have their full details. Businesses can disappear much more quickly and easily than individuals.
- For limited companies, you can perform a free check on a limited company’s basic details using the Companies House WebCheck service.
- Invest in credit reference information – it could save you bad debt in future.
2. Payment terms
- Set out and agree on payment terms in advance and in writing. It’s better to know what to expect than to leave things to chance and wonder why the money hasn't arrived later.
- Whenever you write about payment terms or write on your invoices, include the words: “We will exercise our statutory right to claim interest (at 8% over the Bank of England base rate) and compensation for debt recovery costs under the Late Payment legislation if we are not paid according to our agreed credit terms." Even if you don’t intend to do so, it can be a useful deterrent against late payment.
- Raising a further invoice for interest and late payment charges is an excellent way of gaining your customer’s attention and raising the profile of your outstanding invoices.