In one word cash-flow – not because of their balance sheet or P&L – no plain and simple they run out of money. With basic cash-flow planning you can see this coming a mile of, one example.
One of the most frustrating parts about being an entrepreneur is getting clients to pay up their bills. While the government passed the Late Payment of Commercial Debts (Interest) Act 1998 to protect the rights of businesses, not many businesses actually use it.
Small business, like home-, micro-, lifestyle-, mobile-, SME-, SMB-, SOHO-businesses are losing out due to the chaos created in their cash-flow but also on precious funds that they could have charged clients for late payment.
In a recent survey by Gravdon U.K. it was revealed that as few as 4% of businesses charge interest on late payments. 44% reported adding interest to outstanding invoices and 50% did not charge any interest.
There are several reasons why small businesses choose not to charge interest and these include adding more administrative work to follow through on and losing clients.
While this trend of late payments is not expected to change anytime soon, small business need to protect their cash-flow and there are several ways to do so. To ensure that the business owners always have access to crucial information, they ned to do cash-flow planning and some bookkeeping, in order to get cash-flow plan and actual comparison.
It is not unusual that personal business, like contractor, freelancer, free-agent, self-employed and virtual assistants is owed more money than the overdraft on their bank accounts. They are effectively financing their clients business and should charge interest on money owed in excess to what their bank charges the business.
You can always outsource your bookkeeping and credit control function, use a virtual assistant and WinWeb’s On-Demand Small Business Infrastructure approach to solve this problem – you want to stay in business (?) make sure your cash-flow is good.