The universe is telling me that I need to talk about money this week! It’s almost tax year end, it’s financial year end for a large number of businesses, we are being bombarded with seminars for Making Tax Digital and, well, there’s that Brexit thing which may mean some business disruption (if you haven’t already experienced some).
I googled last week and found a statistic that said that 82% of businesses fail due to cashflow.
And then I got to thinking about my own experience in business, and conversations with my bookkeeper who said that a large part of his work when he first engages with a small business entails:
1. Sending out invoices that should have been sent out months ago
2. Chasing debt
I get it – you’re busy. And – you didn’t start your own business in order to be a bookkeeper or an accountant or a credit controller. But – those two things above could KILL your business.
Many of the accounting packages (Xero, Quickbooks, Sage Small Business etc) do make it incredibly easy to send out and chase invoices. You can even do it “on the move” from your phone! So you should maybe consider one of those. If you don’t want to do that then you need a process – something that will allow you to record when invoices are sent (and remember to do that as soon as the work is complete) and then chase as appropriate. You can keep a register of outstanding invoices in a spreadsheet for example.
The other challenge for a small business is the debt chasing. Many of us have been in the situation of trying to get payment for an outstanding invoice whilst still trying to deliver more services and retain the client – we feel it’s difficult to “wear the two hats”. My solution to that is to engage a third party to do the debt chasing for you – such as your bookkeeper or a VA. It really will pay off.
When I started my first business in 2002 I went to the local Business Gateway in Stirling and I still remember the single best piece of advice I received – You are Not a Bank. It is not up to you to finance your clients’ businesses! So – state your terms clearly up front, and then make sure you stick to them. Send statements – some organisations demand them. Send timely and frequent (but polite) reminders. There is clear evidence – the more “noise” you make, the more likely you are to be paid first!
Some businesses will find they need to invest in some kind of accounting system because of Making Tax Digital – if you do, then make sure you get training on how to use it effectively and get the best return on your investment. You will probably find there are other advantages to using a financial system, not just the basic bookkeeping.
So – as the new financial year starts make time to consider your financial systems – it will be time and money well spent.