credit control

A Guide to Small Business Budgeting

MOMENTUM Business Support Finance
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As a small business owner, you wear many hats – from product development to marketing, customer service, and everything in between. But one of the most important roles you play is that of a financial strategist. Budgeting is vital to the success of your business, but not everyone knows how to do it effectively. In this blog post, we will guide you through the process of small business budgeting, so you can make every penny count.

Track Your Income and Expenses

The first step to effective budgeting is knowing exactly how much money is coming in and going out of your business. Keep track of all your income sources, including sales, services, and any other revenue streams. Then, take note of every expense, no matter how small. 

Prioritise Your Expenses

After you have tracked your income and expenses, prioritise them by urgency. Start with essential expenses, such as rent, utilities, and salaries. Then, move on to things that are necessary but less critical, such as inventory or equipment purchases. Finally, consider expenses that are nice to have but not essential, such as marketing or employee perks. This will help you decide where to allocate your funds when creating your budget.

Set Realistic Goals

The main objective of your budget is to achieve your business goals. Therefore, it’s crucial to set realistic goals for your company. This might include increasing your revenue by a certain percentage, reducing expenses by a specific amount, or launching a new product line. Once you have your goals in mind, create a budget that will help you achieve them.

Review and Adjust Your Budget Regularly

A budget is not something that you simply set and forget. Your business is always evolving, and therefore so should your budget. Review your budget regularly and adjust it accordingly. This might mean cutting some expenses, increasing your revenue streams, or re-evaluating your goals.

Consider Getting Professional Help

Finally, don’t be afraid to seek help from a financial advisor or accountant. These professionals can help you create a budget that suits your business needs and goals. Additionally, they can provide you with valuable insights into financial management, tax planning, and other financial matters.

Remember, a budget is not a restriction, but rather a tool to help you grow your business and achieve your goals. If you’d like to find out more about budgeting or require any additional business support – we’d love to help! Get in touch:

T: 01903 688789 E: makeithappen@mbsmih.com

Is It OK To Chase Payments During Covid-19?

MOMENTUM Business Support Business Support, Finance
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It’s a difficult time for everyone at the moment, especially when it comes to money. I’ve had a number of conversations with clients, friends and other business owners about the delicate matter of how to approach outstanding invoices, or current payment requirements.  

Is it OK or even moral to ask for payment during the current pandemic?

YES! Yes is absolutely the answer, but it’s how you go about it that’s important.

My thoughts are; there are 3 different types of scenarios, and 1 exception. Your customer:

1. is still able to trade – marginally or fully

2. has been forced to close their business for a period 

3. no longer has work due to their customers being forced to close

4. has sadly had to close for good (the exception)

I appreciate there are other influencing aspects here too, such as childcare, home schooling, vulnerabilities, supply and demand etc. Fundamentally though, these can all be factored somewhere into the above. 

So. Let’s look at each of these scenarios individually. 

Your customer is still able to trade: The first one is the simplest. In this instance we would assume that if they are using your services in any capacity, it is because they have a forward need and therefore an income off the back of that. In this circumstance, you can treat your credit control processes in the same way you always have. (I am assuming here that you have always followed the golden rules around building good relationships and providing excellent customer service. Check out our Credit Control advice HERE.

However, that being said, at the moment during this Coronavirus crisis it won’t always be that cut and dry. Another complication here is your customer’s customer. Whilst your customer might be trading fully, their customers might only be partially open or not at all. So the difficulty comes with them receiving payment also. The best way to understand this is to speak with your customers regularly to see how they are being affected and have open discussions around payment plans before you supply your goods. That way, everyone knows and agrees how it will work before you get started and you can mitigate any nasty surprises. In addition to this, when sending your invoice, add a new line or paragraph to your email that shows your understanding of the current climate and reiterates your newly agreed terms. 

If payment is not received and your invoice becomes overdue, you should still feel comfortable following it up – after all, you did agree considered terms in the first place. Keep in mind that things may have changed for your customer, be flexible, but make sure the outcome is fair and reasonable for you both.

Moving on to scenarios 2 & 3, these can be treated the same.

Your customer’s business is closed for a period: If your customer has been forced to close their business due to Covid-19 Government regulations or a lack of custom themselves, this requires a little more understanding and tact, but it is still absolutely OK to discuss payments.

I’ve used the word ‘chase’ in the title of this blog, and we all tend to use it in general. I do however prefer to use the term ‘follow up’. So I’m going to use that here for now, as I feel it better reflects the difficult times we are in, especially when it comes to cash flow!

Whilst businesses have had to close for various reasons, that won’t automatically always mean they are cash poor. The key here is to have open conversations with each of your customers to establish their current financial position, and move forward following up invoices with that in mind. Some customers will need more understanding and leeway than others, but regardless of the outcome of these conversations, you must remember that you have provided a service and as you understand your obligations to pay at some point, so will your customer.

It’s not about showing a lack of empathy or ‘losing your moral compass’. It’s about maintaining good relationships and staying engaged with your customer. Cashflow is the life blood of all businesses, and if you’re going to survive during these harsh times, knowing your income position and the difficulties your customers are up against is the key.

Finally, let’s talk about ‘the exception’.

Your customer’s business is closed for good: This is terribly sad all round. The impact of Covid-19 on some businesses is that they have had to make the difficult decision to shut down completely. Worse, the impact to you is that you have lost income and a good professional relationship (assuming again you have nurtured one with all your customers). 

If this has happened to you, or happens to you, it is likely to be extremely difficult to get outstanding payments for invoices. In rare cases, your customer may have taken the decision to close based on other factors than monies in the bank. If this is the case, you will likely be aware and again can follow the steps detailed above – open discussions, empathy, payment plans etc. Unfortunately, it isn’t very likely, and so depending on the total value you have outstanding, you may wish to seek legal advice to understand your rights and position.  

Regardless of any of the scenarios I have detailed and explained here, the significant element of chasing or following up payments with your customers is the relationship you have with them in the first place. If you get that right you shouldn’t ever be afraid to discuss remuneration for your services. It isn’t a shock that you expect to be paid, but the way you approach it is what makes all the difference!

If you’d like to chat through your specific circumstances when it comes to chasing payments, please don’t hesitate to get in touch. You can call 01903 688789 or email makeithappen@mbsmih.com

If you’d like to talk to me specifically, I also run ‘Open Door Q&A Sessions’ on a Thursday afternoon from 2-4pm, where we can chat for 15 minutes about anything at all business related. Book your free slot HERE.

I look forward to speaking with you soon.

– Mikki

5 Easy Ways To Improve Your Cashflow

MOMENTUM Business Support Finance
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Cashflow is without a doubt the number one issue faced by small business owners. Almost every survey, poll or graph highlights this, and even if they didn’t, we all know ourselves that this is most definitely the case!

We work with a number of small businesses in a wide variety of industries and sectors, and thought we’d share with you some of the best processes we’ve learnt and implemented.

1.    Reduce Payment Terms
Whilst the perceived ‘norm’ for payment terms is 30 days, there is no actual rule or regulation that truly says this must be the case. If you’re a B2B provider that issues invoices on a monthly basis you can decide when they are due. This may vary from client to client as agreed or you may decide on a generic approach, the point is, if you want your invoices paid within 14 days instead of 30, then this is your decision. The benefits here are that payments are received regularly throughout the month, and if you have late payers, their perception of how late the invoice is increases. Whilst you still might not receive the payment on time (within the 14 days), you’re much more likely to receive it within 30 days!

2.    Invoices Due At Different Times Of The Month
Though creating invoices at a set time within the month may be useful for your time management, it’s not ideal for cashflow. Creating invoices weekly with varied payment terms as you see fit or as agreed with your customer will help to ensure that you have fresh payments cycling through the business every week. It will also help with Credit Control and keeping on top of late payers. The benefits here are that payments will flow more regularly throughout the month. If you have 30 day payment terms, and space out your invoices to be sent (let’s say) each Friday, after the first month you will start to receive fresh income each week.

3.    Speak To Account Payers Regularly
The best way to ensure your invoices are paid regularly and on time is to ensure you have a good working relationship with your clients. Speaking with them on a regular basis about what’s happening in their business and understanding if there may be reasons to stop them paying your invoice on time will help to mitigate this actually happening. By simply following up once you have sent invoices out to ensure they have been received, and there are no queries, proactively reduces the likelihood of last minute ‘no pay’ reasons. It also helps build an open relationship and shows your clients that you’re happy to work with them and be flexible where needed, and encourages them to be the same with you.

4.    Get Someone Else To Cover The Credit Control
Another great way to help ensure your payments run smoothly throughout the month is to enlist the services of an independent person to conduct your Credit Control. This ensures you keep your working relationship with your client, they can vent any frustrations to you about your Credit Control person, but ultimately don’t ‘blame’ you, as the Credit Controller is merely doing their job. It’s the age old ‘good cop’ ‘bad cop’ routine, but really works when it comes to maintaining relationships and getting paid!

5.    Invoice On Time!
An obvious but easily and frequently overlooked factor in cashflow. Whilst it can be hard to keep on top of all of your paperwork and do the work too, invoicing should never be sacrificed. Book a regular spot in your calendar each week/month and above all else, once you’ve done the work, get the invoice out there!

We have lots of experience when it comes to cashflow improvement and credit control, so please don’t hesitate to get in touch if you’d like to chat through your current processes and how they could be enhanced – T: 01903 688789 E: makeithappen@mbsmih.com

Credit Control Is More Than Just Calling When An Invoice Is Overdue

MOMENTUM Business Support Finance
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All businesses suffer with cash flow problems from time to time, but it’s often the smaller ones that are hit the hardest. They don’t have the expertise for effective Credit Control and don’t want to have to budget or make space for additional staff to do this either.

There is a common misconception that Credit Control means chasing customers that haven’t paid, and so business owners take on the ‘debt collector’ role – A frustrating one that leads to “I haven’t received that invoice” or “Our customer hasn’t paid us yet”, or perhaps pleas of ignorance “We thought we had longer payment terms”. All of which prolongs payment even further, or worse leaves them feeling it won’t be paid at all.

Frustrated and low on cash business owners then turn to collection agencies. A sound theory, they know what they’re doing right? They’ll get the money in. But at what cost? Obviously a small financial one, but that’s not really what we’re talking about here. The more significant cost is the loss of relationship, loss of future business and possible loss of reputation. What if the customer really did mislay the invoice 3 times? What if there are other underlying issues that could have been resolved if the right questions were asked?

Credit Control is more than just calling when an invoice is overdue, it’s building a relationship and speaking to customers regularly to ensure when it comes to pay day, there are no reasons why your invoice is not the first one on their list.

For a set hourly fee, we provide the solution for businesses nationwide. We use our expertise to put in place and run bespoke processes and do this as a direct representative of your company. You keep your reputation, you build your relationships and you ensure your cash-flow keeps flowing.