Voice of experts: Advice and tips for SMEs | Article – HSBC VisionGo
Because the future is not always as expected, we predict trade and credit risk today, to protect cash flow tomorrow.
Today’s goal is to share advice and things to keep an eye out for to develop your business while managing risk and protecting your turnover and cash flow.
We will focus on 3 key areas:
- Knowing your customers well in order to mitigate the risks of non-payment
- Interacting with your customers regularly is important to develop your business commercially, and assessing the risk of non-payment or insolvency.
- Knowing your client well means obtaining up-to-date financial information such as the latest profit and loss account and balance sheet. You will also need to be familiar with the volume and seasonality of orders, the payment history and if there are any incidents happened lately and so on.
- You can then define a risk level and negotiate appropriate payment terms and conditions.
- Negotiating your payment terms and conditions as fairly as possible
- Once you can demonstrate that you know your customers and have defined your payment terms, the next step is to share this information with your sales and accounting teams. They must be familiar with the invoicing schedule, the terms and conditions of payment, who they are dealing with, and the customer's payment procedures.
- Payment terms are relevant when goods are supplied to customers on credit. It helps you be more competitive and can be adjusted according to the level of risk.
- To negotiate your payment terms effectively, it is important to consider these factors. For example, the country and the legal framework, sector of activity,size of the company and level of credit sales required by the customer.
- Sharing information throughout your company
- Sales and accounting teams must be familiar with the invoicing schedule, the terms and conditions of payment, who they are dealing with, and the customer's payment procedures.
- It is also important that your sales representatives and accounting department share the quantity of work in progress and any overdue payments to avoid new orders being placed if previous deadlines were not met.
Interested in getting more tips for your business? Please watch the video.