Cash Flow and Credit Control

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Credit Control

Credit Control is of vital importance to any company and consequently has a direct effect on the Cash flow. Information taken from your Aged Debtors Report shows the status of your invoices.  For this reason, provide statements on a regular basis.

There could be a genuine reason for non-payment such as an oversight.  On the other hand, there could be a much more serious reason that the company has not paid.  Therefore, it is vital to establish the reason for non-payment of an invoice at the earliest stage possible.

Credit check new customers, ensuring the company has all the relevant information on the debtor.  It is important to keep a record of all communications with the customer.  Particularly, in the event of, when non-payment becomes a problem leading to legal action.

Chasing overdue invoices for payment is important to the cash flow of your business.

Cash flow

Why is cash flow important to my business?

It is important to have an accurate cash flow forecast to assess the net amount of cash and cash equivalent into and out of a business.

  • If more money is coming in than is going out, you are in a positive cash flow situation and you have enough to pay your bills.
  • If more cash is going out than coming in, you are in negative cash flow situation and in danger of going overdrawn.  You will need to find money to cover your overdrafts.

Cash flow is the money that is moving (flowing) in and out of your business in a month.

What’s the difference between positive and negative cash flow?

  • Positive cash flow indicates that a company’s assets are increasing, enabling it to settle debts and reinvest in its business.
  • Negative cash flow indicates that a company’s assets are decreasing.

Net cash flow is recognised from net income, which includes accounts receivables and other items for which payment has not yet been received.

Cash flow is used to assess the quality of a company’s income, that is, how liquid it is, which can indicate whether the company is positioned to remain solvent.

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