How Will The Rise In Iterest Rates Impact Your Business?
Interest rates have been increased and no doubt will continue to do so over the coming months so how could this affect your business? The costs of your overdraft and other loans will now increase. Purchase costs could also rise, resulting in lower margins and a squeeze on profitability. All this could result in a Cash flow crisis, and as we all know, cash flow is the single biggest reason for company failures.
How to prepare and prevent Cash flow problems
There are a number of ways to do this such as investigating any scope for increasing your selling price, to pass on these problems to your customers. If this is not an option, and for many it won’t be, you could look to reduce your purchasing costs? However, your suppliers may well be experiencing the same issues. Reduction of stock levels will also ease short-term cash problems but at some point, you will need to build these levels back up.
The most cost effective way is to tighten your credit controls, so you use your company cash more effectively.
Proactively, you could undertake credit checking on new customers, something that can be simply achieved by ordering a good credit report. This will ensure you only deal with those who will pay your invoices. Similarly by monitoring existing customers you can ensure you are first in line if they start to experience difficulties.
If you have debts exceeding the agreed credit terms, follow them up using internal resources or a third party collection agency. Using a third party has several advantages such as impartiality, authority, specialist expertise and it does not distract your team from their main roles. By choosing a company that will undertake the task on a ‘no success no fee’ basis, you do not risk throwing good money after bad.
Creditreform can provide you with immediate online access to your existing and future customers’ credit status. We also have an extensive debt collection team who will assist in the recovery of your overdue accounts.