The success of a building supplier depends on the effectiveness of other players in the construction industries. One of the major success measures in any industry or business is its ability to maintain consistent cash flow. The building industry is no different. Unfortunately, this is not always the case as suppliers are sometimes forced to deal with discrepancies when they cannot access cash after delivering building materials. What can be done to salvage this situation?
Most suppliers who find themselves in trouble with cash flow do so because they have clients who are always late in paying. They could also be dealing with defaulters, and may also be dealing with clients with cash flow issues. For suppliers to maintain positive cash flow, the following tips should be observed.
Come up with clear credit policies
Close to 93% of businesses have been reported to have issues with late payments from clients. Of these, 49% of B2B invoices in the US are often overdue. In cases where your business is modeled on supplying goods on credit, make sure that managing the collection is also incorporated in your daily dealings. Note that every time you delay the collection of overdue accounts, you may be forced to pump in more resources and spend more time in the collection. For a business with growth goals, this time and labor can be channeled into growing the business. The bottom line is that you incur more costs when there are numerous overdue accounts. So how do you fix this? First of all, you need to outline the process in your credit policy clearly. Come up with a policy that is standardized before it is too late. Fortunately, it can be done as follows:
- Understanding the collection laws in your state: Figure out the legal implications and requirements when setting up a policy. Work with a lawyer if you must.
- Always communicate in advance. It will help if you always let your clients know about any impending late payments. Use official channels like emails, short messages, and follow up calls. This can help improve relationships by preventing late payments follow-ups. The reminder should be done at least 7 days before it is due, as experts advise.
- Send open account letters. It is advisable to send your clients formal payment requests that explain the possible consequences of failure to pay. Penalties should be communicated well in advance.
Investing in Business Management Software
Serious businesses know the value of covering all loopholes. Competition already puts pressure on the business, hence the need to take charge of every penny yielded by the company. The software comes in handy in ensuring all your business facets run efficiently from ordering, dispatch, inventory management, and payments, among others. Smart business owners and suppliers leave nothing to chance. The need to increase the accuracy of the entire process is to ensure that workflows are streamlined and that wastes are reduced, not to mention saving time. All of these will eventually lead to better cash flow, which is what you are aiming at.
Suppliers should consider installing such software. The overall effect is that they will be able to take up more business without necessarily bringing in more workers. Over and above all the gains that such software brings, the invaluable tracking of data tops the chart. This is a crucial component when dealing with credit, especially in the supply business good software keeps you updated with the relevant and up-to-date information, making it possible for one to operate most effectively and make future cash flow projections with ease.
Provide flexible payment options
Suppliers must have convenient payment options and plans if they are to thrive in highly competitive industries. If you can accept credit cards, you will get your cash faster, increasing cash flow and freeing enough capital to run daily business transactions. You will also get your cash immediately when you deliver the goods. It helps you outsource the risk to your clients bank.
Bringing in a Collection Agency
Every successful business needs to have a reliable team of debt collectors. You can engage the services of a debt collector in severe delinquent cases. In the daily running of a business, it is not easy to avoid mishaps such as clients who let you down for lack of payments.
Some clients may stubbornly refuse to pay because of familiarity. In some cases, it could be sheer bad luck where the client loses business and is unable to pay as earlier promised. Bringing in a third party to collect the debt can be the most effective measure in such extreme cases. You may want to look for collectors who are paid after the cash is retrieved. This may give some form of comfort, knowing that they are striving to ensure you are covered. Having an agency that is dedicated to retrieving your cash saves you time to focus on recovering what is lost by building the business. Consider the agency’s reputation when doing this.
The building materials supply industry is growing steadily. Thus, participants in this business should come up with better cash flow management if they are to take advantage of the increased revenues. The sector has had a revenue increase to $93 billion. Smart suppliers can tap into this and grow their business three-fold. It all starts by fixing the cash flow errors.