Getting paid during the tough times

As I have mentioned before cash flow is the most vital component of any successful business. The day that the cash dries up is the day your business folds. With many companies pushing credit as far as they can what can you do to minimise the effect on your business? Here are a few of my tips to consider:

1. Raise payment terms at the point of sale not at the bottom of the first invoice. It is a common misconception that this may mean you lose the sale. I would argue that only poor payers will be frightened off and you can do without those types of customer. So play to their integrity and explain that you operate on fair trading terms - you will be surprised at how many people will agree with you.

2. Where possible get payment in advance. I would suggest wording such as " We never ask our good customers to subsidise the few customers who abuse credit terms by not paying on time. As a result we ask that payment is made when the work is started/goods are delivered etc

3. Offer huge settlement discounts! Take a tip from some of the major retailers. If your target price is £250 then price it at £350 and offer £100 off for payment within 7 days - it works.

4. People pay people they like. Just as the adage that people do business with people they like the same goes for payment. So be approachable, pleasant, deal face to face or phone not by letter, appeal to their fairness, thank people for payment and dont threaten unless you intend to follow it up!

5.Give prompt payers an "added extra". Low cost giveaways such as an upgrade, next day delivery, extended warranty, discount on next order, priority etc

6.Payment is not just the job of the finance team. Use your whole team and exploit their contact with customers. Reward your team and make it into a fun team event.

7. Hold a prize draw. as an example put all prompt payers into a monthly draw with say a meal, champagne or vouchers for the winners. At £100 a month it costs £1200pa - good value for increased cash flow.

8. Ensure your systems are in place. So that you invoice promptly, chase when due and follow up promptly - you will be paid promptly!

9. Offer finance for your customers. Work with your bank and you may even make money out of it. Just think car dealers, golf clubs, electronic stores etc.

10. Be bold. Generally if you do not ask you do not get - so be bold and ask/insist on your terms. A sale is only a sale when you are paid - never forget that.

A Banking crisis or the loss of common sense?

Much has been written about the banks recently with some attempting to lay all of the blame for the current woes on irresponsible lending. To be fair many Banks and bankers deserve the brickbats being thrown their way. A crass rush for short term profit and individual reward at the expense of long held values, care for the customer and simple common sense has seen many of our most august institutions brought to their knees. The reality is that much of the cause for the recession can be pinpointed elsewhere but it is the rescue of the banks that holds the key to the speed in which we exit decline and experience growth.

Reading the plethora of comment would lead you to concur that the means of rescue are complex and beyond the understanding of "mere mortals". I would disagree. Of course some of the operations are fiendishly complex but the strategy should encompass a huge "dollop" of common sense. Much as Margaret Thatcher was derided by nearly every economist when she came to power with her household economics approach (remember the full page press adverts by the economists telling her she was wrong? I wonder what they felt seeing her policies transform this country in a way that no other person has in living memory - although I am the first to acknowledge that mistakes were made.) a clear, well thought out and comon sense plan is needed now.

The medicine is going to be nasty but I do not want to see constant PR exercises by the government with half thought out announcements. What due dilligence was undertaken with the first bail out of banks? Not a lot guaging from the current surprise at the level of bad debts. Lets have a clear, well articulated, simple strategy to sort this out and then stick to it. Encourage saving and well thought out business lending, curtail easy credit for personal purchases and outlaw trading in"financial instruments" that few understand and have no basis in the real economy.

When the time comes for recriminations then we can find out which executives were irresponsible, which Board members were asleep and failing in their duty and what the so called regulators were doing. Appropriate sanctions such as removal of titles and awards, freezing of pensions due to gross negligence and recovering bonuses paid under false pretences are some high profile solutions. The arrogance of those who played with and lost other peoples money cannot go unpunished or public confidence will not return. But first let us concentrate on sorting out the mess before we look for the culprits.

Banking has a huge role to play in our economic prosperity but it is based on 400 years of trust which has been lost in a few months and years. Rebuild that relationship and we can get back to building a country on a firm base not the shifting sand of easy credit.