Maintaining a disciplined approach to the company’s cash flow is vital to the ongoing success of the business. According to the Australian Bureau of Statistics, difficulty with cash flow has been reported by many small businesses as a significant contributing factor in their failure.
Invoicing promptly and ensuring payment is received when due are two ways of maintaining a healthy cash flow. Continual late payment by debtors will have a detrimental effect on the health of the company and likewise, large amounts of money languishing in the 90+ Days column in the Age Receivables report is to be avoided as it is, in effect, an indication of money that is ‘locked up’ and not available for the company to use.
For a company such as FTA that sells billable hours, a disciplined approach to the entry of time into the database on a regular basis (daily if possible) is mandatory. Following this procedure will assist in production of an accurate invoice when a file is closed or in the case of the larger PI claims, the timely production of progress invoices. The importance of maintaining a regime of promptly following up outstanding invoices on a regular basis will also be of assistance in maintaining a healthy cash flow.