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Cash flow is the lifeblood of a business and when it’s restricted it’s often due to poor debt collection. A robust debt recovery strategy can make a considerable difference to the financial state of a company, however, and allow it to operate with more freedom.
Efficient debt collection systems are easy to implement and should be conveyed to all staff members involved in this business area. When a company operates in a unified way its chances of success improve and debtors know that their late or non-payment won’t be easily tolerated.
It’s also important to be proactive rather than reactive where debt collection is concerned, as acting too late can lead the business into severe financial difficulties. So why is effective debt collection so important?
More working capital to function day-to-day
Having sufficient cash to operate the business day-to-day is fundamental to survival and provides the foundations for a company to thrive rather than simply surviving in its market.
Monies to implement strategic plans
Company cash flow needs to be reliable to map out and implement strategic growth plans. Without strong debt collection procedures in place, the business cannot take growth for granted.
Better credit rating
If the company cannot collect its debts it faces the possibility of falling into arrears with its own liabilities. Being able to pay the bills as contractually required allows the business to maintain a good credit rating and can provide broader access to finance with favourable terms.
Avoids financial distress
It’s easy for a company with poor cash flow to experience financial distress and slide into insolvency. Collecting debts efficiently supports business finances and provides a buffer against potential liquidation.
Improved customer relationships
When a business has a trusted system in place to collect payments and methods to avoid bad debts, such as offering a discount for early payment, it can build trust with customers and improve relationships for the long term.
UK Business Finance can offer reliable independent advice that’s tailored to your business, helping you to improve your debt collection results where necessary. Please contact one of the team to arrange a free consultation and let us get your business onto a firmer financial footing.
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
What are my options if I need business finance urgently?
Regardless of how closely you monitor your company’s cash flow, the nature of business means you may still need finance urgently at some point.
What is equity finance?
Equity finance is a business funding option that involves selling shares in return for investment. It’s commonly used by start-ups or early-stage company directors wishing to get their businesses off the ground and propelled towards rapid growth.
Hard asset finance v Soft asset finance
Hard asset finance and soft asset finance both offer flexible ways to purchase business assets. Whether you need a new piece of machinery to increase output or state of the art IT equipment, these types of asset finance options are invaluable in buying them affordably.
Regulated v Unregulated bridging loans – what’s the difference?
Bridging loans are finance facilities that help consumers and businesses to complete property transactions when a financial ‘gap’ needs to be bridged. Examples include a consumer purchasing a new home to live in and a business investing in commercial property.