I spoke at the Evening Standard Business Connections event last week, and enjoyed answering questions on everything from cash flow to mentoring. I wanted to touch upon one of the questions I was asked: I run a debt collection agency and I often hear from people employing us that the debtor is “their best customer”. I have to explain that their best customer is the one who pays. As part of the Start Up campaign, are you reminding recipients of funds that they must carry out due diligence? Can you teach them how to collect their money so that they don’t panic as to how they are going to settle their own bills?
James says: David, you touched upon a very important topic. Cash control has a direct impact on many parts of the business. When you work with your clients make them aware of your payment terms from the off. This will make things easier for you further down the line. I always suggest to any entrepreneur I am mentoring to get an upfront deposit on signing contracts. Back in my recruitment days I would always collect payment and have a set day to pay my contractors. On one occasion my client told me that he couldn’t pay me on time. I was providing a service and to me that was not acceptable. I was not embarrassed to tell the client that I would have to withdrawer my contractors if they weren’t paid on time. It seems quite a strong message to send but my contractors had already done the work and I needed to pay them. Luckily it did the job and the money was transferred on time. As an entrepreneur, you have to be comfortable talking about money, even if it’s ‘un-British’. One of the greatest embarrassments of the British business community is they are not very good at talking about money. But if you’re going to be an entrepreneur, you must have the confidence to talk about money. When you are charging a fee, it’s more important to know when you’re going to get paid than to know how much. If you don't get paid on time, it can prove crippling for your business. Of course you don’t want to be aggressive, as it’s important to maintain a good client relationship. It goes without saying you should practice what you preach - why not pay your supplier not just on time, but early? How do you think you will be perceived? You would become his priority. He would service you first, and he would service you the best. And what did it cost you? Nothing. My final advice on managing finances would be to write down everything that goes in and out or make sure your accountant sends you a statement on a weekly basis. It sounds simple but it really will make a difference. You will know exactly where your money is coming from and where it is being spent.