My sales are booming so why am I almost broke?

Dear Aunty B,

I am in the building trade and am nearly broke because people won’t pay me on time! Why do they buy my products and then wait to pay me, or worse, not pay me? I pay for my stock upfront which comes from France, it then takes three weeks to arrive and then I sell it and then don’t get the money for months. Sometimes I am out of pocket for six months.

How do I make people pay me on time? People can’t get enough of my work and they are usually wealthy people who live in very nice houses. I am so flat out I am going to collapse and I don’t have time to chase these late payers all the time. Also, I am a simple man and want to do things simply.

Desperate and cashless,
Victoria

Dear Desperate and cashless,

Why on earth are you acting as a bank? You have to change your practices immediately. It is money up front honey, from this second on. The simplest way for you to do this is to explain to your clients that they must pay you two weeks before the materials arrive. To shorten delays, get them to send the money straight to France, which then activates the order. Make sure it is all transparent so your customers know they are sending their money to the well known stockist of whatever you sell and not a tax haven in Malta. You also need to bring in a bookkeeper who is charged with chasing payment as soon as the job is complete and the payment is overdue.

Both of these simple things will improve your cashflow. But you may well need to take in some cash now just to tide you over. Alternatively, you can look at some financial instruments that can assist you manage your cash better and they are not as complicated as you think!

Take the time to put your house in order and you won’t look back.

Be smart,
Your Aunty B

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