Turning the tide of the Christmas Cash Flow Crisis

14 Dec 2021

Recognising the warning signs of unpaid debt and early communication is key when it comes to healthy cash flow.

Late payment can present real challenges for small business owners. This time of year, particularly when coupled with the practical issues imposed by the latest round of government recommendations, it is essential to focus on customer engagement to increase the opportunity for healthy cash flow and, in some cases, business survival.

Even if your business is currently in a strong position, the perils of complacency and failing to recognise the warning signs of a customer moving towards a debtor position can quickly become problematic. The difficulties with forward flow for supply chains when late payments become a problem are obvious and can have a severe impact on the survival of a business.

The overall financial fitness of SMEs relies on more than just credit control processes and systems which tell you a bill is overdue. Those emails to remind a customer of an unpaid debt will languish in an inbox and is unlikely to prompt payment.

In order to buffer this, early intervention through customer contact is key – pick up the phone at the first sign of a delinquent account and discuss options for repayment. If you can rehabilitate a customer early it will not only allow for potentially vital cash recovery in the immediate future, but hopefully help you maintain an ongoing business relationship leading to further income which could have been lost but for that phone call.

If your customers do not know that there are options available to them they can quickly become overwhelmed at the thought of a large bill, their head will rapidly disappear into the sand and you will be left frustrated and out of pocket. Even if you cannot find a way to repair the relationship for the long term, a quick call could put you ahead of other creditors, or at the very least give you an understanding of whether recovery will be an option.

Involving a solicitor once reasonable options have been exhausted should be a natural extension of the credit control process. The visibility of your debt will be amplified by the receipt of a letter for a solicitor which, if drafted correctly, will highlight the benefits of early settlement against the need for legal action in terms of additional costs and interest being applied to the debt.

The involvement of a solicitor should not preclude the possibility of settlement and a discount for swift repayment or a pro-active recommendation of a staggered repayment plan could mean the difference between payment and non-payment. Acting with fairness and practicality at the heart of your recovery efforts is more likely to get that debt paid so your focus can move towards not just survival but onwards growth.

Tips for healthy cash flow

  • Engage early with defaulting customers
  • Talk through options for repayment and get an understanding of the reasons for non-payment
  • Act early when you have reached the end of your internal processes
  • Be inventive with repayment options

Elizabeth Ryall is Partner and Head of our Commercial Recoveries team, get in touch with her today on 023 8082 480.

Author

Elizabeth Ryall

Partner