One of the best ways to safeguard your business is to make sure that your customers can pay. Of course, some businesses solve this problem by asking for payment in advance – if you’re buying products online, for example, you have to pay before the goods are delivered. But for most companies, payment comes after the sale – and you need to make sure those customers have the ability to pay. When you choose to outsource bookkeeping services, you bring in someone with the ability to help you risk-assess potential customers and manage credit issues.
The importance of day to day bookkeeping
For many businesses, finances, bookkeeping and accounts are one of the most worrying aspects of day-to-day operation. Unless you are financially-minded, you may not know what systems you need to set up, what things you need to keep track of, and what other things can affect your ongoing finances.
Bookkeeping is an ongoing task that helps you to manage your business finances and your cashflow. It gives you a clear idea of what’s coming in and what’s going out and it helps you to plan ahead, see where bottlenecks or potential opportunities may be, and to change the things that may not be working. Good bookkeepers are at the heart of your business and can help you make sure that you are running this side of your business as efficiently as possible.
Why risk-assess your customers?
Every customer presents a potential risk to your business, as well as a potential opportunity. When you take on a new customer, it’s important that you know they are going to be able to pay, and that’s particularly important if you’re going to be offering lines of credit or payment terms to your customers. And this is one area where you can make great use of your bookkeeper.
Small business owners rely on cash coming in from customers. So, from the very beginning, you should be making sure that your customers have the facility to pay – research suggests that, for most small businesses, once a debt is overdue by around 60 days, the business loses any profit made.
A professional bookkeeping service will help you to put in place a range of processes that help you to check out potential customers, and make sure that, during the sales process, you are checking and double checking at each stage.
First, they can run essential credit checks on the business. These will show its creditworthiness and give you the information you need to decide whether this customer will be a risk for payment, or is likely to pay on time. Essentially, you don’t want to run any unnecessary risks when it comes to money flowing into your business. And if you are invoicing customers after the product or service has been provided, don’t forget that you are already, in reality, offering credit to your customers, thereby taking a risk for your business.
How a bookkeeping service can help
A good bookkeeper can help you to put the following processes in place:
- A customer application process – gathers all the information you need to assess the customer’s creditworthiness.
- Customer Relationship Management system – this helps you to monitor customer activity, including payment record. The more information you can collect on your customer’s interactions with you, the better placed you are to make business decisions.
- Credit lines – if you are considering offering credit, you’ll need a thorough process that includes starting with an initial low credit limit and building up, depending on customer reliability.
- Contingency – if several of your customers pay late, or you are struggling to collect payment, do you have a contingency amount that will see your business through a shortfall in cashflow? A bookkeeper can help you plan for this eventuality – and others.
One of the biggest benefits of using outsource bookkeeping services is the flexibility it brings your business. Fixed, known costs for an agreed number of hours per month, plus a seamless service, because should your virtual assistant go on holiday or have to take time off with illness, another VA can take over and cover the work. So no hassle, less cost than employment and access to years of business experience.
If you’re interested in outsourcing your bookkeeping and financial management, including customer credit checks, feel free to call us on 0800 994 9016 or use our contact form in the menu above.
There is great value in a service like this.
All too often businesses accept new customers on trust, and don’t perform even the basic due diligence.
This is definitely something all businesses should consider, I bet many businesses don’t do it, but sooner or later they will wish they had.