03: Reducing the risks of not getting paid

Getting paid as soon as possible is good for cash flow, as well as for reducing the potential for bad debts. You should issue invoices within 24 hours of a chargeable event, and they should all clearly state the payment terms and due date, the invoice date, any purchase order number, and a description of the goods and services provided.

Other useful safeguards include checking a potential customer’s business with other suppliers, carrying out credit checks and asking for an initial upfront payment that will at least cover your costs.

Additionally, factoring and invoice discounting can reduce late payment risks and improve cash flow. Both of these options involve a third party giving you an advance on your invoices.

It is also possible to take out credit insurance to cover you against the risk of debtors becoming insolvent. This enables you to insure either partial or whole turnover and possibly also selected accounts, but you will have to carry at least 10% of the risk yourself.