When is a bookkeeper not a bookkeeper? The answer – when they also provide you with some proactive advice and recommendations, to help you with all important issues such as cash flow. If you think that a bookkeeper's job is only to make sure that the numbers balance out, why is it important that you reconsider? What other help could a professional like this provide to you, to ensure that your small business continues to grow?
Cash Flow Is King
In financial terms, cash flow is critical to any organisation and is the single biggest reason why small companies run into trouble. It has to be managed – and managed well.
Variety Is the Spice of Life
If you have quite a large customer base, your bookkeeper should advise you to vary your trading terms and not to automatically give each customer the same amount of credit. Usually, a small business "rule of thumb" is to extend 30 days to each and every customer. However, consider varying this and even reducing it to only seven days in some instances. This can certainly adjust the timing of your incoming funds and help look after the cash flow.
Setting a Limit
Do you allocate credit limits to your businesses? Once again, many small businesses do not do this. Each one should have a carefully considered credit limit for any particular trading period. You also need to be careful to adhere to these limits and not be afraid to ask for an upfront payment, whenever a client goes over it.
The Test Drive
How do you know whether the customer is going to be a good payer or not when you first take them on? One good way to test the waters is to put them on a prepaid basis for the first order or two. See how prompt they are when they send you the cheque and this will give you an indication of what they are likely to be like, should you extend them a credit facility.
Keeping on Top
Engage your bookkeepers to send out statements promptly and to follow up on debtors immediately and without delay. You should also have a policy that removes any customers from any credit facilities if they default a set number of times.
Choosing an Adviser
Make sure that you work with a bookkeeper who is proactive and will help you to keep financial matters on track, while you focus on other areas of your business.