JOHN GLOVER: Hello and welcome to another Pendragon Straight Talk. This weeks an interesting one to most companies, cashflow, how do I cope with cashflow, or how do I think we should cope with cashflow.
Cashflow as we know is the lifeline of most businesses, if you can’t get the cash in then you can’t pay the bills, then the bills pile up, you owe money. If you have to borrow money to pay staff or bills, then obviously it becomes a costly thing so to get your money in is important.
So, we normally dedicate, or I suggest you dedicate some time to chasing outstanding payment, even if you put that to a third party and outsource it.
If people aren’t paying you correctly, I find sending a letter of demand tends to wake them up and it’s a good idea to talk to a lawyer, get yourself a really good lawyer upfront because you can get them to write you a letter of demand and then you can use that continuously for a while and if required you can ask them how, or what they would charge to chase money for you if you need their services.
The other one is debt collectors; debt collectors do work. We’ve used debt collectors, nine times out of ten just the fact the debt collector has contacted them makes them pay. Yes, this costs some money but at least you’re getting your cashflow, or some of the cashflow, rather than nothing.
You bring these people in obviously after a period of time, so do your own stuff first.
The other way to look at it is to get your invoices paid by a factoring or cashflow company. They are out there, you pay them a percentage and they pay around 80% of your invoice so you’ve at least got some money to pay either salaries if that’s the important thing, or pay some of your own suppliers because sometimes you’re in the middle of the whole thing.
In regard to running contractors, then cashflow is king, you’ve got to find a way of cashflowing it, at least definitely worth looking at outsourcing that to a third party and at least getting a percent of that to invoice pay so you can pay your contractors and keep them happy.
We tend to work with all of the above, we tend to work with different bits of it for different reasons, however the main thing we find is that we work with our clients, our regular clients to get them to understand why they should pay us promptly and if required we actually suggest that we use other clients, because I know that is a bit hard to do sometimes but obviously if you’ve got somebody who is just not paying you, then trying to look elsewhere to work with a client rather than that particular client.
Obviously, they always say cash is king. You know, it’s true, it still is now. Cashflow is the most important thing for most companies and you’ve just got to look at the best way to get it, but my advice is just to have somebody constantly ringing up and chasing invoices, either for you rather than yourself if you don’t want to do it or outsource it to a third party. Once you’ve got that cashflow moving in then your life becomes a lot easier and the week goes quicker.
Thanks for listening, I’ll talk to you next week.
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