Overdraft denied? Chase your debts instead
Around 30% of small businesses have witnessed a sharp reduction in their overdraft allowance over the last two years, a recent survey has found.
The results of the survey, carried out by finance supermarket Funding Options, correlate with figures released by the Bank of England, which suggest that £5m per day has been taken from the SME overdraft funding pot since 2011.
What does this mean for small business owners?
This has led to overdraft amounts being reduced for most small businesses, and to some new businesses being denied an overdraft provision altogether.
Liquidity will be reduced for small business owners as a result, many of whom rely on overdrafts to ensure that outgoing payments are made on schedule regardless of whether invoices from clients and customers have yet been settled.
Small business owners are therefore looking to other valid streams of income to help balance the books. With software advancing rapidly, it’s now infinitely easier to keep tabs of debts to your company, which if settled on time can help to ease the strain caused by the reduction to business overdrafts.
How do I chase up unpaid debts?
Knowing who to chase up and when to chase them can often mean a mountain of administration.
However, there are innovative new cloud-based solutions that can keep tabs on your finances, notify you of unpaid debts and automatically dispatch reminders to your customers.
How to monitor your finances?
The fundamentals of finance management appear simple; you need to know when and how much customers are scheduled to pay, and offset this against your outgoings. The reality is somewhat less straightforward, with the magnitude of the task detracting from primary business operations.
The right piece of software, such as Xero, can do all this for you, helping you to stay focused on running your business. A cloud-based solution will update you and your accountant with real-time information on your outgoings, including business expenses, payroll and tax requirements, measuring them against estimates and invoices to give you a projected cash flow.
How to invoice customers and keep track of unpaid debts?
Branded invoices in any language or currency can be easily filled in using pre-set templates and dispatched automatically via email or post to your customer. The recipient is then given the option to pay immediately online via Paypal or another online payment engine, as well as receiving details of your company account in case manual payment is preferred.
If the scheduled payment date is missed, then the programme can automatically dispatch a series of reminders to the customer. The outstanding payment will also be highlighted on the master list of invoices for manual intervention, should it be required. Although it is to be avoided at all costs, the logical conclusion for non-payment would come through a small claims court, at which point all records would be readily available to aid a swift and beneficial judgement.
If you’re a small business owner and want more professional advice and assistance to help chase your debts, why not contact our specialist small business accountants today?
