One of the main reasons that clients come to us asking for our invoice finance and invoice discounting services is because their debt turn isn’t as efficient as it could be. For those uninitiated to the world of SME finance, your debt turn is the average number of days it takes your customers to pay their invoices once your goods or services have been provided. A short debt turn is obviously ideal, as your jobs are paid for promptly, leaving you free to settle your own debts, staff salaries, rental payments and the like in good time. A long debt turn is less desirable, somewhat unsurprisingly, as it can leave you lacking in ledger balance at the most inconvenient time, though may be favoured by your clients and customers. If you’ve found yourself in financial hot water before, whether you used invoice financing to help you or not, take a look at our guide to improving your debt turn to take steps to prevent history from repeating itself.
Tighten up your contracts
If you’ve had a problem with late paying clients before, it’s up to you as the contractor to ensure that such problems don’t occur again. Obviously, you don’t want to draw up an unattractive contract that puts off potential clients, but at the same time you need to give yourself a leg to stand on should a client refuse to play ball when the time comes to repay your invoices. In all future contracts simply stipulate a maximum length of time in which you expect invoices to be paid, ensuring that your cashflow management is an easier job in the months to come. If clients still refuse to pay in time, they’re in breach of contract and you’re firmly in the driving seat.
Timetable your jobs
If you think about it, the majority of your company’s monthly expenditure comes out of your bank account at a specific time every month, usually towards the end of one and start of the next. Rent, wages, bills and all of your various other expenses will often be due in the last few days of the calendar month, and if your invoices are due at the same time, any overlap could prove awkward indeed. Instead of relying on your clients paying their invoices on time every month, give yourself a bit of leeway – aim to complete your jobs in the middle of the month so that your invoices are due long before your rent, wages and bills. This way, even if your clients are late with their payments, you won’t have to worry about the bills you’ve yet to pay. Allow a little extra time for late paying clients if you can.
The fact of the matter is, no matter how well you think you’ve prepared your debt turn, it can only take one ill-organised or cash-strapped client to leave you in hot water once more. Instead of panicking when your expenses are due and there are invoices still outstanding, leave yourself a safety net. Take advantage of invoice financing services to insure that you’ve got the capital at your disposal to weather the financial storm, or make the most of our credit management services to reclaim the invoices you’re owed when you need them.
You might also like:
Leave a Reply