This is a guest blog post from Tracey Westell FCICM, Director Pecunia 2016.

Managing cash flow is crucial for any business, including architectural practices. Following on from Caroline’s previous article, Effective Cash Flow Management for Architects, let’s explain why credit and cashflow management are essential to your business.

architect drawing designs

All businesses have a sales ledger – this asset holds all the invoices you issue for payments made into your business. For many, this is your ONLY Asset, so you must look after it.

Do you give credit?

Then, it would help if you reminded yourself that you are lending your money to your customers – like a bank.


  • Every invoice is an asset.
  • Every overdue invoice eats into your profit.
  • Who are you giving credit to?
  • Do they have the ability to pay you?
  • You’re a business – not a charity.

What are you required to get it right from the start?

Know who they are, what they want, and whether they will be good clients and pay you.

Do you have good terms and conditions? This is the architectural design of how your business looks and runs and details what you offer and your expectations from your clients when working with them.

This must include good, firm payment terms.   

Have you discussed how you expect to be paid with the client from the first meeting? If not, why?

After all, you are working for them towards something they need, and you must ask them for payment in return for your expertise and help.

Tips for managing your cash:

  • Take deposits where possible.
  • Credit assessment/check of all customers.
  • Know who your customer is!
  • Make sure your customers know and sign the agreement to your payment terms before you commence business with them.
  • Monitor debtor position and adopt proactive collection methods.
  • Address the issue of slow-paying customers urgently.
  • Set up payments from regular customers via Direct Debit
  • Consider early settlement discount.
  • Apply late payment charges.
  • Look out for warning signs.
  • Design a ‘killer’ invoice.

What is a killer invoice?

  • An itemised list of services rendered by a supplier to a customer, including costs.
  • Terms of payment, 7,14,21 days or even on receipt!
  • The customer must know how much to pay and where to make payment.
  • It’s a legal document.

Ensure that you also have your client’s complete, correct entity name and address of where to send your invoice. This is important as you may be billing the wrong company and will delay payment.

Ensure you send it out as soon as you have finished a piece of work. Do not delay, as this will also affect your cash flow.

Non-payment and even late customer payments will likely lead to cash flow problems.

Late payments also significantly impact your profits, as this is where your profits will come into the business; the longer you get paid, the less profits you make.

Therefore, cash is critical because regardless of when your customers pay, you will still need to pay salaries, suppliers, overheads, and loan repayments on time each month.

Most businesses that become insolvent do so due to a lack of cash rather than profits.

This is why robust credit control processes are so important.

Credit control is a challenging job. It requires organisation, tenacity, professionalism and understanding.

Often, the role involves being a detective, an accountant, a negotiator, a salesperson, a relationship manager and even a problem-solver.

However, effective credit control is a vital tool for maximising profits and minimising risk.

So, if you need help and are worried about your cash management, getting paid on time and want to boost your profits, get a professional credit management expert to help you. It also enables you to obtain better finance opportunities, increases your credit score, and, importantly, keeps you in business. After all, I wouldn’t get my crayons out if I needed some architectural designs – I’d go to an expert like you.

But always remember…

Cashflow – It’s the heart of any business and feeds your business.

  • Best practice credit management can improve financial performance.
  • Increases growth and stability.
  • Good Processes and Policies assist in getting the best from your business and empower your business to financial freedom.
  • Understand your financial position to make better financial decisions.
  • MOT your business credit management structure

For more information on improving credit management in your practice, please get in touch with one of our qualified team of experts to help you navigate your business potential.

After all, ‘Cash is King’ and needed for a successful business.