Business Startup - What's The Biggest Single Threat To Your Success?

Business Startup - What's The Biggest Single Threat To Your Success?

First things first, I’m a qualified Accountant who works in Insurance, now I know what you’re thinking, and I’m not expecting any invites to Christmas parties!!

However, I do know a thing or two about developing a successful Business Startup as well as the associated Business risk.

Of course, there are hundreds of financial issues from PR, HR, EBITDA, GEARING and many more abbreviations to shake a stick at and I know that people study for years to get to grips with these issues as I have, but you don’t have to.

The Best Entrepreneurs Grow Businesses They Don’t Manage Them

99% of the people I know who run their own successful business didn’t think, “Eureka, I want to start my own business, I’ll go to University and learn how to do that”.

They had an idea, made it happen and learnt along the way.

The dirty little secret, as always, is that a lot of the things you need to do are common sense, but most people can lose sight of these once they get lost in their business.

It wasn’t long into my career that I came across the number one process that new businesses need to get control over to ensure they have the very best chance of success.

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Getting The Cash

Not necessarily how do you get it, but how to make sure the company has enough cash reserves to operate effectively to maximise the return on that cash.

Increased Sales = Profits Right?

Almost everybody I come across focuses on sales, “The more sales we make, the more money we make right?”

Well no, more sales does equal more income, but it can also lead to higher costs and also how do we know we are getting the cash for these sales?

Cashflow

Late payments and outstanding accounts receivable have been named the most common causes of cash flow crises in the UK, and it isn’t difficult to understand why.

In simple terms, if you are doing the work and not getting the cash, this inevitably is going to eat into your reserves and eventually lead to cash running out.

This can affect any entity from your startup landlord or small business owner to a large multinational.

The difference being that the speed of the impact will increase the smaller the entity is, not to mention the larger the entity, the more likely it is to have access to funding such as bank loans etc.

What’s The Solution?

So how can a business get that cash in and stop wasting our time chasing the cash (yes, us finance chaps do have other things to do!).

Well, that’s simple get paid as soon as possible but at the very least let’s get paid on time.

If You Don’t Ask You Don’t Get!

In the first instance, let’s get paid before we do any work through getting a deposit or advanced payment.

Like Vistaprint, you do the design, make the payment to them, they print it and deliver it to you. The result no need for chasing debtors as they don’t have any.

If we can’t do that, let's get paid on delivery. “Would you like to pay by card sir” or “Would you like us to put you in touch with our credit provider”.

Making these key activities part of your sales process will make a huge difference, most salespeople tend to think the deal is done once they have the order

“We’ll send you an invoice”, but it needn’t be that way!

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When You Do Need To Provide Credit

Inevitably on some transactions, you will need to provide a period of credit, so if we cannot do the above let's chase our debt effectively, and these are the simple steps I would take:

1. Set out my terms and conditions. When you enter into a new relationship with a customer, make sure they know my requirements for providing credit.

It needs to be a concise document, which outlines the payment terms. Make sure you have written acceptance from the customer of my terms and conditions.

2. Get to know who you are dealing with. Make filling in a credit application form part of your process for giving credit to customers.

That way you can get all the necessary information like their place of business and name of the contact person.

It is also a good idea to get references from other suppliers to determine the customer’s ability to pay on time.

3. Keep proper financial records. This includes making sure you keep track of all invoices and payments made by customers.

A simple bookkeeping program can be beneficial as it can help you to generate invoices, and also list and track any invoices that may be overdue.

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4. Encourage customers to pay on time. It might sound obvious, but sending out your invoice on time will help prompt your customer to pay on time, as will setting out clear consequences for late payments.

5. Always follow up! Once an invoice has been issued, keep an eye on its progress. If a payment becomes overdue, make sure you begin your follow up procedure straight away.

Don’t be afraid to send a letter or email asking for the payment and restating the consequences of not paying.

If contacting the debtor does not resolve the issue, you could add debt recovery costs or use a debt collection agency to assist with the process.

If you are proactive, communicate clearly and keep a record of everything, you will be well on the road to getting that cash in and more importantly, not losing it!

FREE Business Insurance Review

At Insync Insurance, we see ourselves as business partners as well as a business insurance broker.  

We offer modern digital servicing combined with excellent personal and dedicated advice which will support and protect your business.

You can compare landlord insurance or business insurance prices online via our website.

Alternatively, you can book a review with one of our expert gurus at a time that suits YOUR diary, where they will take the time to understand your individual business and tailor a policy accordingly so that you only pay for the cover you need.

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