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Optimise your UK business cash flow

by Ashley Deakin | Jun 03, 2016
  • When migrating your business into the UK, managing your cash flow is vital. It is essential that your customers are aware of what they owe you and how to pay. In addition to inflows, keeping supplier accounts current will help to ensure successful operations. Here are some ways you can ensure you stay on top of your cash flow requirements.

    1. Know your customer

    Verify the name and legal status of the business you’re 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 tend to disappear more quickly and easily than individuals. 

    If you are dealing with a limited company, you can undertake a free check on the company’s basic details using the Companies House WebCheck service. You can also make use of Companies House Beta which allows one to get free copies of past financial statements and find out who the shareholders of a business are.

    Invest in credit reference information before you enter into a contract with a business or an individual. Having an accurate idea of your client’s credit record could save you a bad debt.

    2. Payment terms

    It’s always better to know what to expect than to leave things to chance. Set out and agree payment terms in advance and get them in writing.

    Include the following on payment terms and invoices: 

    “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 of Commercial Debts (Interest) Act of 1998 if we are not paid according to our agreed credit terms.” 

    This provision will give you recourse should late payment become an issue.

    In addition to this, sending your client an invoice for interest and late payment charges is an excellent way of gaining their attention and raising the profile of your outstanding invoices. 

    3. Invoicing

    Always use the most efficient and speedy method to send your invoices. The sooner you ask, the sooner you can get paid. Always send your invoices by first class post or, better still, by email.

    Ask customers what they need on the invoice in order to approve it. Include at least the following: 
    • Your full name and address 
    • Your VAT registration number 
    • Invoice date 
    • Correct customer name and address 
    • Delivery address (if different) 
    • Delivery date and method 
    • Customer purchase order number 
    • A clear description of the goods or service supplied 
    • Accurate quantities, prices, discounts and total amount due 
    • Payment terms and due date 
    • How payment should be made with bank details (including sort-code and account number) 
    • Invoice number or other reference to be quoted by payer 
    • Reference to be quoted if payment is made by direct credit

    4. Chasing payment

    If the customer has not made a payment, contact them immediately. Be assertive about what you expect and when you expect it. Reiterate the consequences of non-payment. 
    In these situations, it is important to be polite, professional and persistent. Follow through on your warnings and do so within the time you’ve stipulated.

    As a general rule, try to get customers to pay by electronic transfer, or better still, direct debit to avoid waiting for the cheque to arrive.

    5. How to ensure you stay on top of things when cash runs short

    You need to plan and adjust your cash flow requirements regularly. Make allowances for differences between your payment terms and those of your suppliers. By regularly updating cash flow forecasts you will ensure that you stay within your financing facilities.

    Businesses often run into problems when cash runs short. In these situations, you need to remember that early communication is key. Don’t avoid talking to suppliers, your bank and other interested parties. If you fail to do so, you might find supplies or finance have been withdrawn or legal action has started. From this point, things are likely to escalate quickly. 

    6. When all else fails

    When a customer is unable or refuses to pay their outstanding debt, don’t let it grow. Stop supplying any further goods or services to that customer. If your product or service is important to your customer, it might be just the lever you need to get payment. 

    Always consider the commercial reality – if the customer is insolvent or has no available funds, further action is unlikely to help. Also consider the costs of any action against the size of the debt. Sometimes cutting your losses is the only way to move forward.

    If you do choose to take legal action, you can do so yourself or through a solicitor. Commencing legal action independently is relatively easy, but takes time and effort. Using a solicitor can be expensive, which may make the claim ineffective, depending on the size of the debt. In light of this, HMRC has put together a free online guide which details how you can take a debtor to court.

    Businesses can take action through the courts or consider issuing a Statutory Demand that can be followed up 21 days later with a bankruptcy order.

    Give us a call on  +44 (0) 20 7759 7553 and we’ll help you migrate your business to the UK. If you’d like more information on our service offering send our team an email.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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