Rayhan Aleem, founder of Alpha Pro Partners shares the company’s insights into the financial health of small businesses.
Alpha Pro Partners has released data from a randomised sample of its SME clients comparing their financial performance from 2021 to 2022. The SMEs cover a cross-section of industries with revenues of up to AED 10 million.
Figures show that on average, the companies’ revenues grew by 27%, and gross profit increased by 17.6%. However, while the overall financial health of SMEs is improving, the challenges faced by accounts receivables are getting worse, with unpaid assets growing by 24.8%.
Rayhan Aleem, Founder and Managing Partner of Alpha Pro Partners commented: “it’s extremely positive to see our SME clients reporting strong growth in revenue and profit. As the UAE continues to thrive, small and medium businesses are maximising their marketing efforts, reducing costs, and optimising their processes to take advantage of the opportunities. Unfortunately, accounts receivables are an escalating problem that could damage their performance if left ignored.
“When accounts receivables turn into late payments and bad debt, it affects everything from cashflow and reporting to employee wellbeing and mental health. SMEs need to address the situation and take proactive measures to improve their collection methods.”
The key steps to introduce include:
1. Technology is your friend – automation is an incredibly powerful tool for small business owners, helping them streamline daily tasks, save time, and reduce errors. There are many suitable cloud accounting software options designed to be easy and cost-effective for SMEs. They can handle tasks like creating and sending invoices, issuing regular reminders, tracking expenses, and presenting a clear picture of outstanding payments.
2. Make it convenient for clients to pay – Adding a pay now option to your online invoice allows customers to pay immediately in a way that suits them. You may even want to offer a discount for paying on receipt of the invoice.
3. Implement a process and stick to it – make sure you have a clear set of standard operating procedures related to when and how invoices are sent and followed up. Include what date invoices are issued, how often reminders should be sent, when you would notify the client of remedial action and what this action would involve. Everyone in the business should understand and follow the same protocol.
4. Keep the lines of communication open – automation can help in many ways but it doesn’t mean you don’t need to communicate directly with the client. It’s always worth checking that the invoice has been received and contains all the necessary information. Asking if they were happy with the service is a good way of following. If payments start to get delayed, communicating directly allows you to find out what the problem might be and find a solution. There are many reasons why clients pay late. If it is due to a cashflow issue on their side, you may want to offer them a payment plan. Always keep communication polite but don’t be intimated or deterred from following up; being persistent can often put you higher up in the queue. And don’t forget to keep every payment communication with the client on file.
5. Know your legal options – If you feel you’ve exhausted every avenue internally, you may want to discuss the situation with a third-party, such as a debt recovery agency or a law firm. The right lawyer can advise you on the degree of breach, as well as the best avenues to secure an amicable resolution and settlement. They will also guide you should judicial proceedings be required.
