Knowing When A Client Is Unprofitable To Your Business Finances

Knowing When A Client Is Unprofitable To Your Business Finances

Many companies have loyal and trusted clients that they work with time after time, which can bring in a good chunk of your business profits. However, there are clients which can prove to be unprofitable to yourbusiness finance, and these are customers which you may need to make the difficult decision to cut ties with.

Non-payers

One example of this is a client that simply fails to pay you on time. Despite several invoice reminders and phone calls from your accounts team, you may find that the customer never pays and therefore racks up a large amount of debt.

Even if you have found that the client eventually does pay you, this can be damaging to your business cash flow to continue along this path. You may want to remind your client that you could sever business ties with them, if they do not start paying you promptly. If they fail to adhere to your reminders, it should be time to cut your ties with this client and move forward.

Low earners

Although all customers count, you may find that you are spending a large amount of your day working for clients that simply do not yield enough profit for your business. You may find that the amount of time you spend on this client does not justify the price that they pay you. Perhaps they are an old, loyal customer which used to receive a much smaller rate but since times got harder and the business has moved forward, you may find that this just does not cut it anymore.

In this instance, you may want to talk to the clients directly. You can tell them that your prices have risen and this is in line with other industry price rises. You may find that they are all too happy to meet your price rise, due to the foundation and loyalty of your business relationship. However, if they are not prepared to pay the higher price, you may want to cut your ties with them and look to seek new custom.

A healthy cash flow

What is important for your business to succeed is a healthy cash flow. If there are clients that jeopardise this, you should sensibly and practically decide to change this situation. You may find that a shortfall in your cash flow requires some business finance to help you back on the mend. Business finance can be beneficial to your business, as it allows you to invest in essential business practices or solutions that will work in the best interests of your company. Choosing well-managed repayment plans and a professional company will allow you to fill the gap whilst your cash flow re-stabilises.