Seven Steps for Effective Cash Management for Your Business

Did you know that 85% of new small businesses close down in the first year of operation?
According to a report conducted in an issue of USA Today, the statistical failure rate of small businesses in America is as follows:
In the first year of business 85% of small businesses close. The second year closing statistic is 70%. The third year in business shows a small improvement in staying power; 62% of businesses will stop working by this time. By the 4th and 5th year (respectively), 55% and 50% of businesses will be closed.
The data for small business failure varies from country to country and from source to source, but the average statistical data of business failure in most western style economies is skyrocketing high!
When operations of new businesses are analysed, planning and management of cash flow is one of the critical areas that is quite often underestimated and therefore overlooked.
Let us be honest, clearly defining and implementing a professional Credit Management System is something that very few new businesses ever prioritize in their first year.
How well you do your debt collection can make or break your business!
Every business has different methods and issues with getting paid. So let us look at some of the key factors in running a successful Credit Control & Management System.
1. Taking time for proper financial planning, policies and procedures to get the business started and to keep it operational (Advance planning will save lots of time and money later).
2. Developing and defining Terms of (Business) Trade and Credit (Having in place clearly defined and written payment terms are a must for any business).
3. Developing procedures for credit checking of prospect customers/clients (These procedures will weed out potentially bad clients that you do not want and need in your business).
4. Having accurate and timely billings (The sooner your client receives your bill, the sooner the payment is due).
5. Sending Statements/Reminders on a regular basis (Regularity in sending payment reminders will bring stability in your cash flow. Do it every week if necessary).
6. Developing and implementing Debt Collection/Recovery procedures and techniques (Define & implement steps in following up bad debt).
7. Managing and controlling bad debt by outsourcing (Do not write off bad debt; instead use professional debt collectors and legal debt recovery options).