Creditsafe research shows that businesses aged between 3 and 10 years old had the most insolvencies in 2015. This could come as a surprise to some as start-ups are often painted with the ‘most likely to become insolvent’ brush. It’s even more surprising to note that businesses aged between 10-25 years also had more insolvencies than start-ups last year. Established businesses over 25 years old had the least insolvencies than any other business last year, so if you’re in your business for the long term, how do you get in the safest possible position?
Here are some top tips to consider to help your business go the distance!
- Manage your finances
Cash is king in business; without a healthy cashflow your business would start to go downhill pretty quickly. Managing your finances is the key to spotting if anything is going wrong in your business or if you need to re-evaluate. By keeping note of what is coming in and what’s going out of your company also allows you to forecast effectively for following months. The saying goes that ‘wealthy people’ are wealthy because they live below their means, the same could be said for business. By only spending on your business what you earn from it is the best way to stay out of debt. For a start-up this could be different as you need to borrow money to get things going, however when you grow and start to get out of that debt it’s always a good idea to try to stay out of the red. Another tip would be to keep some cash aside for emergencies; like a big customer not paying you. With this emergency fund you have a safety net for your cashflow if anything does go wrong.
- Credit check your customers
One of the main reasons companies become insolvent is due to customers not paying them. Credit checking your potential customers before you sign contracts with them can save you from incurring bad debt and being left without your invoice being paid. More invoices last year were paid late than on time and unfortunately the late payment trend is still sweeping the UK. Many businesses struggle with late payments because they don’t forecast for them in their cashflow, by credit checking your potential customers you can see their trade payment data and how well they pay their bills from real suppliers they have dealt with. A company credit report from Creditsafe can also show you if potential customers are getting better or worse at paying their bills, the average time it takes them to pay their bills compared to the industry average and a suggested credit limit to offer them. Monitoring your existing customers via our Risk Tracker service can allow you to stay up to date automatically with your customer base, spotting any warning signs before it’s too late. You will get an email alerting you if anything changes on their credit report which saves you from manually checking on a regular basis.
- Make sure you get paid
Set realistic payment terms for your customers and chase up any unpaid invoices in a timely manner. If you have a customer that is holding out on paying you, you can start to send debt chasing letters, or even go down the legal route of debt recovery. It is also worth noting that it’s important to always make sure your own bills are paid on time, if you don’t this could affect your own credit score on your company credit report and could discourage suppliers from doing business with you. Read our blog on how to get paid on time here.
- Target the right people for new business
When you’re putting effort into your marketing campaigns, the last thing you want to do is to send them to the mass market where they will be skimmed over if you’re lucky and discarded. Narrowing down your target market will always benefit you. Have a clear message and direct it at businesses that your services or products could help. Think about whom you are targeting, how you could speak to them and what you could offer them. Creditsafe’s Marketing Prospects gives you over 22 different variables to customise your marketing data, and an added bonus is they are all pre-credit checked beforehand so you can be confident that you are targeting people who are able to pay you should they become customers.
- Don’t ignore loyal customers
Customer retention is a big deal in sales. A statistic from Marketing Metrics states that there is a 60-70% chance of selling to an existing customer, where-as there’s only a 5-20% chance of selling to a new prospect; so there is a lot of profit to miss out on if you don’t put effort into retaining your current customers. Offer discounts, vouchers for renewing or set up a loyalty rewards scheme. Customers who feel appreciated are more likely to continue doing business with you than customers who don’t. Bain and Co have also said that a 5% increase in customer retention can increase a company’s profitability by 75%, so what are you waiting for? Read our blog on how to boost customer retention for more ideas.
From credit checking, marketing data and vital due diligence tools, Creditsafe can help your business grow and stay protected. Get a free trial of our system today!