Protect Your Cash Flow Against Your Customers Collapse
In another familiar story just recently construction and development company Austruc Constructions has been placed in the hands of administrators. (read the article on smartcompany.com.au here)
I emailed one our clients who operates in the construction industry and not surprisingly he said “Thanks, I just talked to a few contractors that got taken, there not happy at all.” – Jason Smith.
I have written a few blog posts on protecting your cash flow but thought it was worth mentioning again. The most common problem amongst business owners that we see is not protecting your businesses cash flow against possible insolvency of your customer.
Common problems that we see:
– Only one customer/debtor that you supply.
– Not having enough “spread” of customers .
– Failure to perform simple credit checking for new accounts.
– Failure to limit the amount of credit given to any one customer.
– Failure to identify and manage collection of invoices.
– Failure to identify and manage when debtor payments increasingly become later.
There are many actions you can take to protect cash flow, the practical problems behind many of the above not being performed are lack of time, resources or simply the excitement of taking on lots of work and not thinking of the consequences if this customer goes bust leaving you with a huge gap in your bottom line, placing the business under enormous stress to meet creditor commitments and finally becoming insolvent.
Simple credit checks on new customers, checking references or word of mouth about the customers behaviours with payments can prevent losses.
Another very useful way to protect you against your customers insolvency is by applying for Trade Credit Insurance (Read the blog article here and video).
Part of AR Cash Flow’s services to clients is constant monitoring of debtor/customer credit and reporting. With extensive backend credit checking and being backed by one of Australia’s largest insurance companies, we help our clients by advising on credit limits and ensuring that your customers and new ones are worthy of dealing with and aiding in preventing future losses from non payment of invoices.