How’s your Business Health?
As we discussed in a previous blog post, a positive cash flow is good for business health. Late Payments are still a major issue for SME’s, with the recent Irish Small & Medium Enterprises Association credit watch survey revealing an average credit period of 71 days! This has a huge impact on your forecasting and budgeting capabilities. While ISME fights for mandatory 30 day payment terms at state and EU level, what can you do to improve your cashflow situation?
Is your Cheque Dependence Slowing down your SME?
Research on cheque usage published by the Central Bank of Ireland last week may shine a light on one aspect of the problem. Ireland is one of only a few European Union member states that still use cheques for regular payments. 20 of the 27 EU member states have effectively eliminated cheques.
Ireland ranks behind France as the second most intensive cheque user in the EU. And the research found that SME’s are particularly dependent on cheques, they are responsible for 90% of business cheques issued in Ireland and nearly 56% of cheques are payable to SME’s. All if this means delays and leads to cash flow problems.
Cheques Cost Time and Money
There is a strong case for businesses, particularly small businesses to review how they make and receive payments. How often have you contacted a customer and heard the following excuse;
‘…your cheque is in the post…’
Cheque payments cost you time. Most cheques are sent in the post, which adds more time to the process. A cheque must be processed by your administrative staff, and cheque payments take days to clear in your bank account.
Cheques also have a significant financial cost. A study from the European Central Bank estimated that a single cheque costs around €3.55. This cost takes into account:
· Cheque Stamp Duty - currently 50c in Ireland
· Bank Charges
· Postal Charges
· Staff Costs
Taken together, that’s a hefty price to pay!
Small and medium businesses dependence on cheque payments is a significant contributor to Ireland’s late payment culture. Becoming less reliant on cheques could have a positive impact on your average credit period and on your cash flow.
So what is the solution?
There’s no easy fix but there is one key thing your business can do to improve your average credit period and your cash flow.
Move from a cheque laggard to an EFT adopter
Irish businesses need to end their dependence on cheque payments and adopt an automated system like electronic fund transfers (EFT). EFT payments will save time and money lost using cheques and, most importantly, you won’t continue to hear about cheques in the post!
Assess your cash flow
It’s also a good idea to keep a close eye on your cash flow. Accounting software like Yendo allows you to quickly and easily assess your cash flow using the Budgeting function. If your cash flow is negative, you can take proactive steps to address this.
Sign up to Yendo now to access a 30 day free trial. Subscriptions start at just $9 a month.
Business is Mobile with Yendo apps available in theGoogle Apps Store and now theStaples App Store.