Bad Debt, Bad Business

Manage your debt, increase your cash flow and build a healthy, growing business with these three key steps.

- Marnus Broodryk

Our cars run on petrol. Our bodies run on oxygen. Our businesses run on cash flow. 

You can bridge cash flow gaps with smart financing, but that’s a reactive approach. This article is about making sure you never need to think about bridge financing in the first place. It’s about how to run your business better. The most common, and avoidable, reason that businesses starve without cash is simply because their customers are not paying them. In a slow economy, this becomes an even bigger problem and is a huge challenge faced by entrepreneurs.

Here are three critical areas you need to address to manage your debt better, and some actionable items to implement right now.

1 CREATE A PAYMENT RULEBOOK

If you want your clients to play by the rules, and to be able to deal with rule-breakers, you first need to decide what those rules are. No, it doesn’t need to be a 300-page document, just draw up the criteria that suit your business best. By doing this, and sticking to them, you can actually create good clients, and everybody wins. Here are the important things you (yes, you) need to decide:

Will I sell on credit?

If you can avoid credit altogether, and have a 100% cash on delivery business, then that is definitely the way to go. If you’ll lose out on business by not offering any credit whatsoever, only then does credit become an option. This seems really obvious, but many SMEs just assume that they have to operate on buy-now/ pay-later. They do not.

When will someone qualify for credit?