IT
MAINTAINING POSITIVE CASH FLOW
BMJ finds out about how builders merchants can use specialist software to ensure they are providing the best service to their customers.
D
espite the integral role builders’ merchants play in keeping the construction industry moving, maintaining positive cash flow is a worry for many. It can be difficult to balance trade credit accounts against day-to-day expenditure or business costs, and no matter how many loyal customers you have, even a few late payments could cause some big problems.
Chris Fisher, UK Operations Director LBMH at ECI Software Solutions, says there are ways builders’ merchants can steer clear of financial trouble while still offering a high quality service.
“Figures for the final quarter of 2020, published in the Builders Merchants Building Index (BMBI), painted a positive picture, confirming the sector’s continued bounce back from the first national lockdown, which - understandably - led to a dramatic decline in sales,” he says.
“For merchants looking to offer exceptional customer service, trade credit accounts make it easy for local tradesmen to pick up supplies or take advantage of promotional prices, as well as helping to build lasting loyalty. However, they only work if customers pay on time and in full.
“Some of the key considerations merchants can take to ensure accounts are settled within the specified timeframe and to ensure their own businesses remain profitable start with running the right checks,” he continues. “It’s important to always run checks and set limits on any limited company or sole trader you’re planning on working with before offering them a trade account. “It’s also a good idea to regularly check credit scores of existing and new customer
trade accounts, especially during uncertain economic times, as this might help identify a cash flow problem before it arises by highlighting anyone with a history of late payments. This gives you the opportunity to discuss the topic with your customers head on.”
Setting up credit accounts Fisher says that when a new customer is granted a credit account, merchants need to make sure they set realistic credit limits and only increase the amount once the customer has proven themselves to be a reliable and prompt payer.
“When setting these limits, be mindful about how manageable they are for your own business. Should numerous customers max out their credit account, you don’t want to be left unable to replenish stock or fulfil existing orders,” he says.
Reliable document management
Recognised as a way to streamline the invoicing and accounts receivable processes, as well as strengthening overall record keeping, storing documents electronically on a central system can bring many benefits. Fisher says: “Not only will this provide instant access to POs, quotes and invoices, customers can also be billed automatically, reducing the time spent on administrative processes and giving your team full visibility of what’s owed and whether there is a risk of late payment.
Securing payment
“Whether you have a long-standing relationship with the customer, or you’ve only recently
June 2021
www.buildersmerchantsjournal.net
started doing business with them, chasing unpaid debt is never easy. Once you’ve sent multiple reminders and exhausted all other avenues, you may have little choice but to try and claw back the money through a debt collection agency or solicitor.”
He adds that, before going down this route, merchants always need to do their research and weigh up the costs before committing. “They should look to find a firm with experience of working with builders’ merchants. Many operate on a no-win, no-fee basis and can take your debtor to court, however it’s still important you choose a reputable and reliable company. “We’ve seen how damaging bad debt can be to your business and how quickly it can happen, however credit management and invoicing systems can allow you to set realistic limits and payment terms.
“The quicker you invoice, or spot a late payment, the sooner you can take action to resolve it. Getting the basics right around your document management processes means invoices are less likely to be missed by mistake, so you can concentrate on chasing the payments that will make a difference to your business’s fortunes.” BMJ
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