Accountant offers tips for small businesses

Date: 5th September 2008

Accountants have warned that small businesses are increasingly struggling to cope with late payments from customers.

The Institute of Chartered Accountants in England and Wales (ICAEW) warned that the credit crunch meant that it had become far more important for small businesses and sole traders to manage their cashflow and this included making sure they received payments on time.

Clive Lewis, ICAEW's Head of SME issues, said that there were a number of "golden rules" when dealing with debtors in a downturn that all small businesses should follow to keep their cash flowing.

These include ensuring that small businesses know their customers and are sure they have the ability to pay bills in the first place. "This might seem like looking a gift horse in the mouth but a debtor becoming insolvent owing you two to three months’ work will create a big hole in you finances for something which costs £20 or so," Mr Lewis explained.

He added that firms should agree payment terms before any goods or services are supplied. The accountant added that proper and prompt invoicing is also important.

"Don't be afraid to ask for payment," the accountant advised. "Telephone shortly after you send your invoice and progress the invoice through the customer's invoice payment system noting who you speak to and what is said in conversations."