The difference between profit and cash can be a difficult concept to understand. In very simple terms, if it costs you £5 to make something and you sell it for £10, then you have made a profit. But if you don’t actually receive that £10 for another four months – and in the meantime you continue to incur further costs – you may well not survive before receiving the cash.

Late payment is a recurrent problem in British business and it is essential to ensure you have enough finance available to bridge the gap between servicing your customers and receiving payment. This is commonly known as your ‘Working Capital’ and includes such things as your stock, the amounts owed by your customers and generally the cash you require to manage your business on a day to day basis. It is vitally important that your Working Capital requirement is built into your business plan and included as part of your overall funding requirement to ensure sufficient cash is available to manage your business.

Another huge issue is maintaining cordial relationships with your customers while you are pressing them urgently for payment. To do this, it is essential to have proper systems in place with specific credit terms on invoices. You must be ready to explain the terms to your customers then follow it up and act on it. Professional advisers can help to introduce such procedures and also, in pursuing your outstanding debts on your behalf. This divorces the company from the debt collection process to a certain extent and helps to maintain personal relationships between your sales staff and your customers.