Sunday, 11 April 2010

Dropbox is worth a try!

If you like to either backup files from your computer to an internet storage site, or need access to up to date versions of files on different computers, then Dropbox is probably worth looking into.

You can get 2Gb of free online storage / backup space by clicking on the link below:

I’ve been trying it for a while and it works better than iDisk, which is part of the MobileMe package. I found the following review, which backs up (please forgive the pun!) what I was thinking myself (can’t vouch for this blogger’s command of the English language, unfortunately, but he makes some good points!).

It works on Windows or Mac or Linux. There is a small piece of inobtrusive software to download. After that the automated backing up and file synchronisation happens quickly and quietly in the background. There are other nice features, one of which is that it keeps a history of all the different versions of files that you save (and access every event that happens to your files and folders via an RSS feed – for those so technically inclined!). So if you want to go back to previous versions if you have edited a document, say, and saved it, then you can – very easily. The other thing is that you can share folders with other people very easily, although they have to be dropbox users too. This sharing feature is so much easier than Apple’s iDisk it’s like kindergarten by comparison. It’s also better than google docs, because you can share any type of file, not just office documents.

And if you sign up using the link above, then I get an extra 250 Mb of storage space!

Just thought I would share!

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Tuesday, 15 December 2009

Cash in For Success: Lesson 5

"Credit control" is the discipline and function of controlling the amount of credit your customers are getting from you. It exists to ensure that your customers do not take more credit from you than you want to give them.

In this short article I just want to cover the bit of credit control relating to chasing for payment. So I thought it might be helpful to outline some ideas for what you could put in your credit control procedures. The specifics may be different for every business, but some of the general themes should be helpful to all businesses that allow customers to take some amount of credit. (Because of this, when I refer to 'you' doing things, please assume I mean the royal you, including the credit controller, bookkeeper, management accountant, finance manager, financial controller!)

1. Remind the customer about invoices just before due

If you are supplying products in volume, so that you are constantly sending out invoices, then you should send your customers a statement of invoices not yet paid, every month or maybe even every week.

On a set day every week, make a list of all the customers that will have invoices due for payment within the next 3-7 days (depending what you think is best). Give them a courtesy call. Now when I say a "courtesy call", that's exactly what it should be - courteous. You are not chasing for payment in this call, nor are you raking up the fact that they didn't pay the last one on time (necessarily). So the call should be pleasant and without pressure.

The purpose of the call is to, a) ensure that the customer has received the invoice; b) check they have processed it fully and there are no problems with it; and c) find out when they expect to be able to pay the invoice. Don't expect the customer to give you a firm promise at that stage (if they do that's a bonus, and something you can hold them to). You are just trying to get a rough idea for your cashflow forecasting.

2. Politely remind the customer about unpaid invoices just after they are due

On your credit control day each week, make another list of customers whose invoices have only just gone overdue in the last week.

This call is the same in tone as the last one - very easy going and polite - but this time try to get some sort of commitment to a payment date, preferably in a matter of days.

3. Chase by phone two or three times at weekly intervals

Your other lists will be made up of customers whose invoices are further overdue, and are also past the date they promised on the last call. At least at this early stage, there is no need to call a customer who last week promised to pay in two weeks time!

The next two or three times you call the customer about overdue invoices, you will be reminding them of promises made, and asking them politely to make new promises, but without making threats or warnings.

4. Warn them when an escalation step is about to be reached

By "escalation step" I mean a point at which you turn up the heat! That means either the point at which you start charging late payment interest, the point at which you make contact higher up in the company, the point you stop supplies to the customer, or the points at which you start various steps of legal proceedings (including formal insolvency/bankruptcy proceedings). That's probably roughly the order to step up in turning up the heat, and you should give the customer adequate time to pay between each step.

You will still be asking for commitments for payment dates at this stage, but at the same time you will be telling the customer when you want to be paid, i.e. immediately. Their promised date does not have to be accepted, and you will be giving them deadlines and chasing and escalating immediately deadlines are missed.

5. Always carry out your threats

Treat customers like children (in that regard only!). If you don't do what you say you are going to do (escalate to the MD or start legal proceedings), then you will never get customers paying on time, because they will never take your threats seriously.

6. Be fair and continue to love doing business with your customer

Be absolutely fair, legal and reasonable in everything you threaten and do. Unless they are very bad payers you may reasonably want them to buy from you again. So don't be rude or aggressive. But don't wimp out on collecting your cash either.

7. Finally, get things in writing

Always keep written records of each contact with the customer, including promised payment dates and reasons for late-payment. Always record what you have threatened, so that you remember to carry out the threat if necessary. And for the more serious escalation steps (stopping supply and taking legal action) make sure that you have informed the customer in writing, even if you have informed them in some other way.
All the best!

Wednesday, 2 December 2009

Cash In For Success: Lesson 4

Last time we were privileged to have Edwina Taylor, an expert in the field of credit risk, pass on some excellent advice on using credit reports, setting credit terms and credit control in general. I hope you found it useful.

We have two more lessons to go, as we look at how we can get cash in quicker. This time I want to look at two administrative issues that can trip you up, and next time I'll outline roughly what I see as a good credit control procedure. Then after that... well, I haven't thought that far ahead yet!

There is a kind of logic to the way I've been approaching this. Up to now we have majored on the issues to consider before you get to invoicing the customer/client - forecasting, credit limits, knowing your customer. This time we'll look at invoicing issues. Finally, we look at procedures once invoices have gone out.

What are the invoicing issues that can delay payments? Sometimes administrative issues can delay customers paying you. I have seen both sides of this - in other words, as both a supplier trying to get paid, and as a customer being asked to pay. And sometimes the administrative issues are genuine, and sometimes they are being used as delaying tactics. And sometimes it starts off with a genuine issue, which the customer's accounts team capitalises on to keep hold of your cash a bit longer. (Yes, it's your cash, not theirs, if the invoice is overdue. And seeing it as your cash will help you have the right mindset when chasing for payment.)

I just want to give two examples of where administrative sloppiness can cause delays in payments (actually, it may be better to call it "lack of attention to detail" or weak procedures, since "sloppiness" implies a criticism. Sloppiness is only a fair term where you know you should do something and you don't do it, or you can't be bothered, or don't see the point).

First, if the details on the invoice are incorrect then the customer is within their rights to query it and ask for a replacement invoice. An invoice is a legal document, with certain essential elements. If a customer may feel they will run into problems with tax (corporate or indirect/VAT) if they book/pay an invoice that is not legally correct. So they are entitled to an invoice that contains the right elements - whether that be a VAT registration number, the correct company name or specific wording in the description.

Some customers will be good at coming to you immediately to point the problems out and sort things out immediately. A lot of customers won't be so forthcoming, and won't tell you until you start chasing for payment. So make sure you know what an acceptable invoice would look like to the customer, and set your procedures so that you and your staff produce them like that.

Second, make sure you send the invoice to the correct person or department. Obviously this is particularly relevant to bigger companies, where the person you deliver the product or service to may not be one who processes the invoice for payment. If you don't send the invoice to the right person, address, department, email address (or you don't send it in the right format - paper or electronic) then, stating the obvious, the customer won't pay you because the right people won't know to pay you! And you potentially won't find out you made an error until you find they have not paid by the due date.

Make it a priority to make a relationship with a contact within the customer's finance and/or accounts payable team. People will normally go the extra mile for people they know and have built up a good relationship with, and they will normally be more honest too.

To sum up, if you have got all the invoice details right and are talking to the right person, then it will make chasing for payment so much easier.

And it's the chasing for payment procedures that we will come to next time.

Please let me know if any of these issues affect you, and if you have any tips of your own for getting round administrative issues with invoices.

All the best!

Thursday, 19 November 2009

Getting Feedback is Both Helpful and Risky


Just wanted to share with you a recent experience, where I learned a valuable lesson.

I have been considering whether it would be worthwhile setting up an internet-based offering to help small business owners/managers with financial management. From talking to a couple of people in business it seemed as if there may be some interest in having a site where you can get access to helpful tools, resources, templates, checklists and courses, coupled with the availability of someone like me on the phone or by email. It seemed a good way of giving access to financial management help much more cost effectively.

So I followed some advice. I thought, before I design and develop this I'm going to ask people what they want, and find out what they would find useful. So I designed a survey using my free SurveyMonkey account!

I then sent a link to the survey to CF&M subscribers. I also posted the link on three discussion forums on LinkedIn.

The feedback I got was so varied, it shocked me and depressed me for a little while at least. This is the first time I have done a survey, so I kind of expected that I wouldn't have done it perfectly. But I was still a little disappointed with my efforts when a couple of people very helpfully pointed out one or two glitches. I was still very grateful to those people for pointing them out though, as it gave me a chance to correct them straight away.

On the LinkedIn forums feedback was very direct. One person complained that the survey was "rubbish", which then led to others jumping to my defence and pointing out that that person had not read the survey correctly or gone into it with the right attitude. On another forum the survey was described as "well-conceived"! Interestingly, whilst I was quite hurt by the "direct" comments in the first, it actually generated so much discussion that it spun off lots of really helpful ideas, and was the most active of the three LinkedIn discussion threads.

So, what are my learnings?

First, it's good to get the ideas from your target market before diving in to develop something new. The survey is not closed yet, so I haven't fully analysed what it tells me, but so far it has thrown up some pleasing confirmation of the idea, and a quite different idea of what would be more or less valued.

Second, when you "put yourself out there" you are taking a risk. You have to take the rough with the smooth. Some people are going to love it, some people will hate it. You have to learn from all the feedback, not just the bits you like. It doesn't mean you have to agree with it, but just listen to it, understand it, assess it and decide what it tells you.

Third, when surveying it is best to test the survey first with a close and controlled group. Their specific remit is to give you feedback on the survey itself, as well as completing it. They should hopefully find where there are glitches, and where the questions are not clear or easy to address. Once you have listened to, and addressed this friendly feedback, you are in a much better position to collect the views of a wider group.

Finally, strangely, controversy is not necessarily a bad thing. I'm not, at this point, sure whether creating controversy deliberately would be right. That seems a bit manipulative, and lots of people would see through it. But certainly don't be put off if you make some waves. "There is no such thing as bad publicity" is a bit of exaggeration (witness Gerald Ratner!), but there is a grain of truth in it. One of the secrets of harnessing those waves would seem to be to continue to conduct yourself with integrity, and to use the engagement with people wisely to both show your professionalism, get your point really heard, and get as much useful feedback as possible.

I hope that's helpful.

If you want to take a look at my survey, and help me out if you are the owner or manager of a small business, here's the link:

Click Here to take survey

Wednesday, 18 November 2009

Cash In For Success: Lesson 2

I know this looks strange posting Lesson 2 after Lesson 3, but there is a reason... I forgot to post Lesson 2! These articles have appeared in the Creative Finance & Management eZine in the right sequence. I usually post the articles on the blog a few days after the newsletter goes out, but in this case I forgot. Oops! Sorry.

Lesson two is all about doing what you can to minimise the risk of non-payment by your customers - doing credit checks and setting credit limits.

I suppose the first thing you can do is to not give credit at all! I don't see why small companies should be funding bigger companies (presuming that's who your customers are). If you have already paid for goods and services in providing your product/service to your customer, why should you have to wait any longer to recoup that spending? So, if you can, get cash up front (especially if you are providing a service) or cash on delivery.

What you are trying to do here is minimise your exposure. You are exposed if you have provided valuable products or services to your customer/client, but have not yet received payment. It's an exposure to potential loss, because if they don't pay you then you will have given away something valuable for nothing.

So what do you do if you can't get cash up front or on delivery? Well you will want your exposure to be as small as possible without restricting trading too much.

The two tools you have to help you to keep your exposure as small as possible are credit limits and credit terms. Many small businesses don't use these tools, because they either don't know how to set them, or they think they will lose business if they set them. But just think how much you would lose if you have given a big credit limit (or none at all) and generous payment terms to someone you thought would be a good customer, and then they go bust after maxing their limit. How much would the loss be? Much more than you would lose by limiting their spending power with you.

But how do you decide on credit terms and credit limits? Should you have standard terms and limits? The answer to that question is varying degrees of "no"!

Credit terms are more likely to be standard than limits. Find out what competitors and other players in your industry give. You will then have some idea of what your customers will be used to. But even then you shouldn't feel like you have to stick with those in every case. So if the standard in the industry, or for that type of product/service, seems to be 45 days or 60 days, it's perfectly fine to try for 15 or 30 days. The smaller the term, the less your exposure will be. You can, perhaps, justify this by saying, "I know that other companies will give you 60 days credit, but we're just a small company and we can't afford to be giving customers that long. And remember the reason we are better is that we are smaller and more responsive [i.e. this is another opportunity to plug your USP]."

But, having made that last point, NEVER do the reverse and use generous credit terms as a selling point. "Choose us, we let you take longer to pay!" You are obviously getting desperate if you have to do that! What you are really saying if you do this is, "I know it looks like we are selling widgets, but really we want to be your bank!" You are NOT in the business to lend your customers money, so get them used to paying you as soon as you reasonably can. And also just think about what kind of customers it will attract - the ones who are desperate for credit and therefore more likely to go bust and not pay you, or more likely to try to pay late every time as well. Not the kind of customers you want!

What about credit limits? This is more difficult. And I haven't got space to talk about it this time, so it will have to wait until next time. Sorry.

So in two weeks we will have a think about how you would go about setting credit limits.

In the meantime see if you can find a shortlist of companies, local and national, that can provide credit checking reports.

All the best!

Cash In For Success: Lesson 3

By Edwina Taylor

Despite the UK Government's interventions and the succession of recent interest rate reductions, there seems little sign of a mellowing in the commercial banks' attitude to lending to businesses. Forecasts claim that it will be 2011 before any meaningful return of confidence in the banking system. If access to external finance remains difficult to obtain, businesses will need to be vigilant in their management of working capital during 2010. All reasonable care needs to be taken in the management of trade credit.

Sound credit management can minimise the risk of a business being landed with bad debts. Obviously that risk can never be completely eliminated, even in benign trading conditions, but in these cautious times, the aim of the exercise must be to ensure that the credit offered reflects the clients' ability to repay it.

SME's must consider taking elementary steps to protect against the risk of bad or late debts, so: -

  • Consider what methods of payment you are happy to accept from customers. Retail businesses in particular need to be flexible here, but credit & debit card systems offer protection to the seller, which is less affected by subsequent changes in the customer's circumstances.
  • For non-retail transactions, consider setting a threshold beyond which an extension of credit will be conditional upon a satisfactory credit reference check.
  • Decide in advance what your firm's policy is to be with regard to late payments. Many firms incorporate interest clauses in their payment terms, but regardless of whether you do this, any business in the UK is entitled to charge statutory interest, currently set at 8%.
  • Ensure that all invoices are sent out promptly, with the name and address of the business clearly and accurately stated along with your payment terms. Many firms believe that charging interest on late payments acts as a further incentive to customers to pay promptly.
  • Keep an eye on outstanding invoices and chase debtors if payments do not arrive when expected.

What if payment is not forthcoming?

  • Send a letter to the debtor, stating or implying the consequences of a continuing failure to pay. You can always use a solicitor to write on your behalf, but there will then be further costs incurred.
  • You could sell your invoices to a factoring company or approach a debt recovery firm to chase the debt for you. This will relieve you of the work of pursuing your debtors, but will have costs attributable to the collection.
  • Court action can recover debts. In the UK, for debts of up to £15k you will go through the County Court who will allocate the claim to one of three different streams, including the small claims stream. You may be able to recover collection costs if you win.
  • If all else fails, then, for debts over £750, an unpaid creditor can initiate formal insolvency action.

Chasing Payments

Most businesses have heard the old chestnuts: - "the cheque is in the post", and "may I have a copy invoice". These are generally delaying tactics, but don't let it rest, and don't be afraid to insist on immediate payment.

Be diligent with processes - follow through the system of chasing debts, perhaps using a similar pattern as follows:-

Courtesy call the customer enquiring as to whether there is a reason for payment not being made;

Deal with any disputes on the order - asking for payment of those items that are not disputed, advising that the disputed items will be sorted out;

Where there is a cash flow problem agree a payment structure;

Keep records of all conversations and correspondence, email, fax, letters;

If all else fails put the company on STOP until you have been paid.

Remember unpaid bills are a way of easing your customers' cash flow problems at the expense of yours.

Credit Where Credit Is Due

Customers are the lifeblood of any business, but it is worth remembering "a sale is not a sale until it has been paid for". Extending credit is always risky and any business is taking a chance of not being paid, ultimately resulting in loss of profit, valuable time wasted in chasing the debt, and unwanted expense in taking legal action, only to be left with the bill being left unpaid.

Extending credit is like lending customers your own money. Would you advance a cash loan to a complete stranger? I guess your answer is no, but that is exactly what you are doing when you provide goods or services on credit.

Credit checking is widely used, but is it being used correctly? How do you evaluate how safe a business is?

Do you really understand the credit report?

Do you scrutinise the figures or just merely check that there has been no recent adverse activity?

Do you have a financial expert analyse the report?

Do you take up trade references?

Do you offer every customer the same credit terms?

Do you talk to the customer's Bank?

Do you check out the Directors' personal credit ratings?

If you have answered NO to one or more of the above, your business may be at risk. Risk Assessment has become the way forward. Most businesses carry out some enquiries, but the majority are insufficient.

Remember Turnover is Vanity, Profit Is Sanity, Cash Is King

Taking the risk out of extending credit is a vitally important and prudent move to adopt. See our 10 tips to help limit the risk of advancing credit accounts: -

1) Conduct a credit report for each new customer preferably backed up with a financial analysis;

2) Ensure that you ask for 3 trade creditor references and take them up;

3) Ensure you ask for a Bank Reference and that you speak to the bank;

4) Obtain an annual credit report for all customers;

5) Review all customer credit limits annually and do not be afraid to amend the terms or limits;

6) Have clear credit control policies which are "cast in stone" irrespective of the customer;

7) Include a Retention of Title (ROT) clause in your terms and conditions. It can be worth having a Solicitor draw it up for your own protection;

8) If you are supplying a Limited Company, consider obtaining a Personal Guarantee (PG) which will afford protection and allow a claim to be made against the Directors personally if the company folds;

9) Set the credit limit YOU are comfortable with not what the customer is asking for. For orders in excess of the credit limit the balance may be paid for COD or prior to delivery;

10) Ensure customers understand your credit terms and get them to sign the terms and conditions confirming their agreement.

Before you open a credit account be absolutely certain that your company understands your customer's payment system. Some companies will not allow payments to you until you are established on their system. Some companies insist on 90 day payment terms. Be sure that you agree in writing with your customer that payment is to be on your terms, not theirs. It is worth noting the day your customer runs the "cheque run" especially larger companies, government departments, Councils etc. Many only have one "cheque run" each month. You must ensure invoices are sent at least 1 week in advance of this date.

How can Frost Risk Services Help?

With our help, you can:

  • Know who you are doing business with;
  • Find out who controls that business;
  • Review their financial situation;
  • Check their credit-worthiness.

You can check the credit status of any business online with Frost Credit Checking 24 hours a day - See - It's easy to use, updated daily, and comes with a solvency assessment written by a licensed Insolvency Practitioner if required. Whatever your interest in a business, we can give you bespoke reports and solvency assessments. We'll look at your options and help protect your interests, if need be.

For further information on this or any other debt related matter please call Edwina Taylor on 0845 260 0101 or 07515 334 251. Email Offices in Croydon, Dorset,Manchester, London