We have entered into uncharted territory. There have been many predictions of some form of recession happening at some point, but we’ve never seen such a rapid shutdown of so many businesses. We don’t yet know what the full impact will be on our economy long term, but with some degree of optimism, we have to remain positive. It would be very easy to close our doors and wait for it all to end, but an ostrich approach isn’t going to work. Here is how to keep your business going during COVID-19 and how to continue to get paid.
Staying open for business is one thing, staying in business is another. You can make sales and send out product, but you’ll soon have a problem if your customers don’t pay you. Sales aren’t worth anything if you don’t get paid. Following these top tips will help mitigate non-payment risk and keep you firmly on the road to success.
Know Your Customer
1. Try to assess their ability to pay as best you can.
- What do they do?
- How long have they been in business?
- Do they have financing?
- Who ultimately pays them?
- Are they exposed to sectors being affected particularly hard?
- What are the standard payment terms in the industry sector they operate within? Will these work for you?
Know your customer, and know their ability to stay afloat during this time. If your customer is in an affected industry that will take a massive hit during this pandemic, will they be able to pay you for your products? Don’t be afraid to call them and have a conversation about where they are at with their finances. Maybe they have a financing partner that provides you some comfort in their ability to pay. Maybe you can recommend your own financing partner to work with them and assure both of you stay afloat.
2. Get a credit application from any new customers. Make sure this includes at least two trade references and check them. See if there is any obvious link between your customer and the referee.
Evaluate credit of new customers. Require trade references, and actually check those references. Dig in to see if there is a connection between the references and the new customer. Some people may try to take advantage of a slower economy by defrauding small business owners. Protect yourself from this by doing the work upfront rather than getting burned and facing losses.
Manage Existing Credit
3. Set a sensible credit limit and payment terms.
Once you have set a reasonable credit limit and payment terms, you must stick to them. Increasing a credit limit because you haven’t been paid is never a good idea. Use a credit reference agency like Dun & Bradstreet to help you make the decision on the amount to set, but bear in mind how they paid before this crises may be very different to today, particularly if they are exposed to industry sectors which have virtually been shut down. If in doubt, get paid in advance or at least take an upfront deposit.
Good Invoicing Practices
4. Once you have supplied your goods and services, make sure you invoice promptly.
Invoice your customer as soon as you have delivered the product. The longer you wait to invoice, the longer you wait to get paid. Call your customer to make sure they received everything they needed and confirm they are happy. Also make sure they are aware of the payment terms and have the right information in their system to pay you when that time comes. See here for more information on how to create an invoice and best invoicing practices.
Manage Your Receivables Closely
5. Track and monitor payment patterns closely.
If you notice it starts to take longer to get paid than before, this may be a sign of trouble. Call to confirm receipt of product and invoice. Call with a courtesy reminder before the due date. Then call again to ask for payment when the invoice falls due and they have yet to pay. With your credit limits in mind, keep selling to your customers, but keep track of how much you have open in your receivables versus how much money you have in your bank account. Letting your capital age in your open invoices means taking a hit to cash flow to make your own payments or payroll.
6. If you aren’t getting paid on time, stop supply!
Make it easy for your customers to pay you by accepting multiple different methods. Consider accepting credit card payments or implementing an online payment portal. You want to make it as easy as possible for your customers to pay your business for your work. Be sure to follow the above tips to make sure your customer will be able to pay you. There is no worse feeling than doing the work and spending the time and money only to take a loss through customer non-payment.
Reliable Business Financing During COVID-19 Pandemic
Companies like Eagle Business Credit offer invoice factoring facilities that include credit management free as part of their services. This mean you get access to working capital funding and have the benefit of a team of experts working alongside you. Invoice factoring is a debt-free and reliable source of small business financing during the COVID-19 Pandemic. Approvals are quick, and approvals do not require a high personal or business credit score or lengthy time in business. Factoring services improve cash flow to help your business stay afloat during this time. We understand that time is in short supply, so we work fast to help you.
If you need money for your business and are unsure how to get hold of funding quickly in the light of what is happening give us a call on 855 420 8318 and see how we can help.