How easily can your business cope with slow paying customers?

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A recent survey carried out by the credit reference agency Graydon and the Forum of Private Business (FPB) highlighted that late payment by companies was having a domino effect, with 56% of businesses that are paid late being forced to delay paying their suppliers.   16% said they had almost been put out of business as result of late payments.

Only 53% of the respondents in the Graydon/FPB survey said they assess their cash flow using cash forecasts.  In other words nearly 50% of the businesses don’t use cash forecasts!  

Why should a business use cash forecasts?  

Cash flow problems can have a disastrous affect on a businessimpacting on relationships with suppliers, funders and staff morale.  Day to day juggling of receipts and payments and talking to suppliers and customers can be all consuming and… there will probably be too little focus on the business in its widest sense.  If “word gets out” about cash problems it can impact on sales and worst case, a business can end up in a death spiral.  In short cash flow problems can be serious bad news.

Forecasting provides visibility, so potential problems can be flagged well in advance; hopefully you can then manage a problem before there’s a crisis.

Preparing the forecasts provides a focus on the factors that drive cash flow.  For example, you will need to forecast and to target sales and customer receipts and this will help you maximise performance in those areas….and therefore cash.

The unexpected happens.   Some people think that this is a reason for not forecasting.  On the contrary a good forecasting model will allow you to quickly understand the impact of changing circumstances and help you respond. 

Interestingly the Graydon/FPB survey suggested that those businesses that experience delayed payments are more inclined to use cash forecasts –a case of needs must?   However prevention is far better than cure, after all what’s preferable, having visibility and a cash focus or… a cash crisis?

If you would like to find out more about how cash forecasting could help your business, then please e-mail mail@camroseconsulting.co.uk or call 020 3137 2279

Incidentally, if you are having customer payment problems, you may want to subscribe to my free White Papers as you’ll also get my credit control tip sheet 10 Ways to Get Your Bills Paid Faster.  Alternatively please feel free to get in touch.

Further information about the Graydon/FPB survey can be found here in an article on inspiresme.co.uk.

 

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