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· The cash needed for running your business and supporting your upstream supply chain comes from your customers paying for the goods and services they buy.
· These funds provide the cash needed to cover all the business overheads plus the wages of employees and the purchase of materials and services
· The sales and senior management teams should be involve themselves, as appropriate, to ensure that customer payments are made on time
· Collecting payments from customers is a important task and requires you to:
o Be consistent in how you pursue and obtain payments
o Establish who in your customer is responsible for releasing the cash
o Adopt a professional approach, reminding customers in advance when payments are due and expecting payment to be on time
o Develop a good working relationship with your customers’ senior managers so that outstanding issues and special circumstances can be discussed
o Ensure all customer paperwork is accurate and on time. Any queries should be promptly and adequately addressed, leaving no reasons for payment to be withheld
· Outstanding balances should be reviewed daily by the senior finance and sales managers. All necessary actions should be taken to obtain payments
· A senior manager should personally write to the managing directors of customers with outstanding bills, requesting an immediate settlement
· Payment terms for large contracts should be negotiated as part of the selling process and can be used tactically to increase the chance of winning orders
· Sales managers should undertake a financial risk assessment for new customers and take responsibility for restricting exposure to non payments
· You should undertake a regular financial review of significant customer accounts to assess the risk of non payments resulting in bad debts
· Your finance manager is responsible for monitoring outstanding invoices and taking actions to ensure the business has the cash required to trade
· Ideally, you should arrange to receive payments from customers before having to pay suppliers
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