The latest research released by Ipsos MORI, sponsored by RBS, asked a simple question of 250 SME leaders:
"What actions, if any, are you planning to take in the next few months to improve/alleviate your cash flow position?"
Surprisingly the most common answer of all (29%) was that there were no planned actions, even among those who had reported a deterioration in their cash flow situation over the previous months.
The obvious question is why? By far the most effective method of improving cash flow is through pro-active debt chasing, early in the cycle from invoice issue. The same survey also found that 80% of respondents thought active invoice chasing to be very useful, and 56% felt that running credit checks on all customers to be a valuable exercise.
Given that such activities are proven to improve cash flow and reduce the risk of bad debt, the only conclusion to draw is that businesses are hampered from completing these tasks by a lack of resources. Many businesses perhaps do not have the necessary skills in house to deliver these improvements.
In smaller companies many roles are hybrid in nature and credit control often falls to the bottom of the pile of 'things to do'. In the current economic climate this a reckless approach. Even where an SME has a dedicated resource allocated to credit control, this becomes a single point of failure - what happens if they are off sick for a period?
One solution is to outsource the activity to a specialist. Not only will this save you money, it will also reduce your bad debt risk and improve your cash flow. You can get access to a £45k Credit Manager or a £20k collector on a 'pay as you use' basis, and you never need worry about sickness or holiday cover.
If this sounds to good to be true I'm delighted to tell you that it isn't. At Octempo:RM we have been providing precisely this service to SME's for the last two years. So, other companies are doing it and getting an advantage over their competition in the battle for their customers' cash. Isn't it time you considered doing the same?