To reduce the amount of risk you take on with customers is a big part of managing your cash flow. It’s all about visibility and control: visibility over which customers owe you money so you can chase payment, and control over the amount of credit you extend to those customers in the first place.
Here are some ways you can manage your cash flow and reduce your risk of bad debt and insolvency.
View invoice outstanding balances
Before sending a new invoice, it’s a good idea to check whether the customer owes you any money and how much of that is overdue. You can then make a decision as to whether to continue with the sale.
Set customer credit limits
You may also like to consider setting a credit limit for regular customers. Credit limits encourage customers to pay their outstanding invoices faster, improving your cash flow and reducing the risk of bad debt. You can set credit limits for customers within contacts, then view them within that contact or when creating a new invoice.
If you’ve already set credit limits for your customers, go back and review them to make sure they’re appropriate in this current economic climate. It’s also a good idea to review your payment terms and tighten them up where you can (for example, reducing them from 30 days down to 7 or 14 days), particularly for new customers or those who consistently pay late.