Monday, 6 February 2017

Cash Flow is King

Whether you are in business or not, you’ll have heard the phrase ‘cash flow is king’, many times before. The saying has never been more true in this time of uncertainty when businesses of all shapes and sizes are just paused waiting to see what happens next This is making the mammoth task of  trying to balance the books even more difficult than usual.

One of the most difficult tasks any small business owner can face is how to chase up an overdue invoice. I say difficult because the SME has to navigate a tricky path between having their bill paid and not falling out with the customer. Here are some tips that will help any small business owner chase up overdue invoices:

Check payment runs - find out when customers make payment runs and what the cut off is. There’s no point in submitting the invoice on the 20th if the cut off for that month's payment run is the 19th!

Make it easy to pay – You should have a clear collection policy in place outlining credit terms, how you will collect money and any overdue payments.
Make invoices clear – having a good system in place to record invoices is key. There are many software packages available like Free Agent that our clients use that make it very easy for you to track payments. Remember also that, the last time a company can object to an invoice they receive is on the day they receive it. After that time, they cannot quibble and dispute it.       
Follow customer instructions – large companies in particular often have strict systems for paying. Maybe they want a special invoice number – so make one for them. Also, ensure that it’s consistent throughout your communications to avoid confusion.

Follow up promptly – Make sure you have a consistent collection procedure and always follow up as promptly as possible. Keep a close eye on patterns in which clients generally pay; and ask yourself whether this fits in with your billing cycle? If the client does not pay ten days after the invoice is due, send them a ten-day letter re-iterating the fact that the invoice is due and (politely!) asking for payment.

Be polite – Shouting threats is not going to do you, or your business, any favours. If all else fails, and the client is ignoring you, or refusing to pay the bill, then consider whether you really want their business in the future, and make a decision about whether or not it’s worthwhile to apply to a county court (used to be known as small claims court) to claim money you’re owed by a person or business. You can process a claim for money owed up to a value of £100,000 online. This covers most debts owed to SMEs; but if the debt exceeds this level, consult a solicitor. More information can be found at

Consider as well that the business could also be going through tough times, or they could be unhappy with the service you have provided. Either way, your main aim is make them pay their bill. Remember cash flow is king. 

This article appeared in Huddersfield Examiner, Kirklees Business News February Edition page 14 

Wednesday, 1 February 2017

Too quick off the blocks?

The interest rate cut by the Monetary Policy Committee of the Bank of England didn’t come as a total surprise, like Usain Bolt’s triple-triple - but some of the BattleAxe’s grumpier interlocutors have been wondering if it may just prove to be a false start.

The MPC’s reasons sound sensible after our Brexit vote.  There are genuine fears, from some, of a downturn and job losses resulting from that vote.  Cutting rates is a classic ploy to encourage businesses to keep investing and spending, by showing they can borrow cheaply.  

However: what message is this sending out so soon after the vote?  Yes, after a lengthy and bitter campaign, the economy might have been expected to take a bit of a wobble.  Some people seemed genuinely amazed on June 24th that the lights came on, buses ran and overseas companies were still buying from the UK! 

The grumblers’ nagging doubt is that cutting rates right now suggests the UK is panicking or a sign of an economy that is out of control.  Both would be somewhat at odds with the latest figures on employment and consumer spending – like suggesting GB’s women’s 470 sailors or Giles Scott would fail to medal with just the last race to go!

Only time will tell how Brexit will actually impact the economy.  So far, the noises on trade deals from non-EU countries have been very positive.  Lower sterling makes imports more expensive but also makes exports cheaper, fuelling British exporters. They may need to reset sights to trade more actively with the 85% of the global economy that’s outside the EU. However, if we produce goods the world wants at the right price, that gives us profits to pay for those imports.

The other question is, will the base rate cut actually make any difference?  Well, of course, it depends on who you are! The drop may be raising smiles from people with mortgages, but they are LIBOR linked nowadays, so the cut may not lead to a wholesale drop in lending rates.  After all, the banks are already muttering more loudly about low margins than some countries have been about our success in the velodrome. 

Sadly, savings rates are almost bound to drop – thank goodness Mark Carney has come out against negative rates where you end up paying just to leave your cash in the bank!  That’s as attractive a concept as Yorkshire coming outside the top 20 in an Olympic medal table….