In new series for Business Advice, Grid Law founder David Walker offers practical help on strengthening the cash flow of your company, starting with an assessment of Britain’s late payment problem.
It’s the time of year when many of us focus on shedding bad habits and getting fit. But how many business owners and entrepreneurs are doing the same for their business?
In this new Business Advice series, I’m going to take a look at how to get your business in shape by improving your cash flow. But don’t worry – it will be a lot less painful than going to the gym every day.
In a previous article, I gave you the five keys that will unlock the cash in your business. I explained that decreasing your accounts receivables, the amount of time it takes for your clients to pay you, is often the biggest area for cash flow improvement.
The trouble is, it’s the area that’s most often ignored.
Why aren’t small businesses doing all they can to tackle the late payment problem when it can have such catastrophic results?
There’s certainly an element of not knowing what to do, but these days, when you can Google the answer to almost anything, a lack of information should never be an excuse. In my opinion, the main reason why small business owners don’t tackle the late payment problem is their mindset.
They think it’s a problem that someone else should solve for them. They think that new legislation, codes of conduct or guaranteed payments dates will help, but they won’t make any difference whatsoever.
Sadly, even Paul Uppal, the long-awaited small business commissioner, is going to have very little effect on solving the late payment problem despite this being one of his main tasks.
There’s nothing he can really do to help small businesses get paid any quicker because he has no real power.
If you complain to the small business commissioner about an unpaid invoice, the best you can expect is some advice on how to resolve the problem and avoid it happening again.
So, you have to accept that nobody else is going to solve this problem for you.
You are still the one who has to take action to get paid.
We already have all the laws we need to end this problem once and for all. We just need to start using them and that requires a change of mindset. We need to realise that nothing is going to change until we take full control of the problem and start doing something about it.
So where do we start?
Away from the office, I love sport and am fascinated by sports psychology, especially what makes the difference between winners and losers. From what I’ve seen, elite athletes and the top entrepreneurs share many of the same attitudes and approach to problems.
They don’t make excuses and they take 100 per cent responsibility for whatever situation they’re in. However, what really makes a difference to the results they achieve is what they focus their attention on.
They focus their attention on the process, rather than the outcome.
In sport, you can’t control what your competitors do, the conditions or even the decisions the referee may make, so you can’t control the result. All you can control is what you do. So, you must focus on the process of putting in a winning performance. If you do this, you will have the best chance of winning.
The same is true is business, and recovering your unpaid invoices. You have no control over when your clients will actually pay you. The only thing you have full control over is the process of getting paid.
You have control over when you invoice your clients and when you follow up if you’re not paid on time. If your credit control process doesn’t lead to payment, you’re in control of when you take legal action.
Even before you get to this stage, you’re in control of the clients you do business with. If you built your business relying on a few (or even one) huge retailer that has a reputation for squeezing everything they can out of their suppliers, that was a decision you had control over.
Late payment is not an insurmountable problem that someone else needs to fix. It’s a relatively simple issue to deal with, if we just take control of the process.
To help with this, in my next article, I’m going to give you a very simple guide to effective credit control. In the meantime, if you need any help or advice in tackling late payments, please feel free to email me at email@example.com and I’ll be delighted to help.
Catch up on some of David’s recent Business Advice articles:
- How to deal with fake business reviews that seek to damage your reputation
- The biggest business mistake entrepreneurs make and how to avoid it
- How do you decide whether to take someone to court?
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