Say the words ‘financial reports’ and many people run a mile, but for those with their own businesses, they are probably the most vital words of all and ones that can’t be ignored.

Despite this however, many people are overlooking the importance of keeping their financial systems up-to-date and are failing to implement even the most basic procedures.   The number of businesses who don’t even know if they are making a profit or a loss at the end of each month is staggering, and this can have potentially disastrous consequences. 

To avoid any nasty surprises and to make sure business owners know exactly how much money they are making (or losing) each month they should take some time to  run a profit and loss report on their accounting software package.   This is essentially a summary of business transactions for a specified period and records all sales, expenses and income generated by the company.  

A comprehensive and accurate profit and loss report has a number of advantages that will help the business to become much more efficient and will give the business owner the tools to drive the business forward.  One important benefit is being able to identify patterns and trends in the way the business operates.  For example, it may be busier and more productive across particular months of the year and by highlighting this, it will allow the planning of more effective staffing levels.

Detailed and accurate management accounts will also enable the examination of selling prices and costs, and to compare salary expenses to set realistic budgets for ongoing activity including marketing and training.  A further benefit is that by examining the reports over a period of several months, problem areas can be pinpointed and, most importantly, solutions sought.   Waiting until the end of the financial year to find out you have been making a loss for 6 out of the 12 months is not always the best time to find out.  A business owner needs to be reactive and proactive in making changes for the good of the business.

By ensuring the correct and accurate data is inputted, means monthly and end of year profit and loss reports can be shared with lenders, shareholders and prospective investors to assess and identify the financial health of your business. 

Despite the importance of such activity, many businesses simply don’t have the time to keep on top of their accounts functions.  At Jigsaw Business Services, we specialise in helping busy business owners do just that, and can assist with the production and implementation of monthly management accounts as well as all other accounting tasks.

Every year, thousands of start-up businesses go bust. Many are profitable but are owed money by customers. Unable to pay suppliers, they are eventually forced to cease trading.

Below are some tips that will help you keep a close eye and firm grip on what’s owed to you.

 Tops tips on getting your invoices paid on time

 1. Sign Your Customers Up
Ensure your company has signed contracts/proposals & written Business Terms with all customers stating clearly your payment terms. These Business Terms should also be highlighted on your invoices . Be sure they know what the credit terms are; do you offer discounts for prompt payments, bulk purchases etc?  Also state any additional costs payable (e.g. VAT or carriage costs), and whether you charge interest on overdue accounts (all businesses are legally entitled to do this).

2. Is A Purchase Order Required?
Many businesses now have internal purchase order (P.O.) processes; and often require signed purchase orders before paying invoices.  Ask the business owner/manager/department placing the order whether they need to raise an internal P.O and if so, have they done so covering the total value of the order.   Ask for a copy of the P.O and quote this number on all invoices relating to that service as no payments will be made without it.

3. Prevent Excuses
Take away excuses for delayed payment. After dispatching goods or services, ensure your customer has received them and that there are no problems with quantity or quality.  Many business owners have difficulty chasing outstanding invoices, the thought of having to speak to a client about this fills them with dread and they are fearful of tainting the good relationship.  Reality is, the client expects to be chased – either by you directly or by somebody else in your organisation.   In this current climate, clients are unlikely to settle invoices if they are not being actively chased.  This will become more apparent over the coming months/year, and it’s very important for businesses to keep on top of debtors. 

 4. Send Statements
Send statements at a different time to your invoice, i.e. don’t send the statement with the invoice it will just get put in the bin.  Also, by sending these separately, the tactic can provoke questions, particularly when original invoices have been lost, not received, or mislaid, (but if you do call to ensure they have received it, this is less likely to happen).

 5. Check On Expected Pay Date
Whilst making the initial phone call to ensure safe delivery of the invoice, you can also ask what the likely payment date will be.  Remember to ask whether they have specific cheque run dates and method of payment.

Then a week before that payment date, get confirmation with your client that everything is still OK for the expected payment to made.  Notes of dates and times and names of those you have spoken to are all helpful.  It’s important to build rapport with your clients account departments.

6. Use Telephone To Chase
Chase your money by phone rather than letter. Some experts in this field say the telephone method can be 80% more effective! Always prioritise your cash collection activity, making sure you chase the oldest and largest debts first. Be friendly but firm when speaking with them, and don’t forget to remind them that you could (if you so wish) charge interest on all late payments.