Managing cash flow is essential from small businesses. Unfortunately, many small businesses find it a challenge. In the worst case scenario, businesses can go broke by failing to manage their cash flow effectively. Here are some tips to keep in mind to manage your cash flow more effectively.
Make Your Payment Terms Crystal Clear
Do this right from the outset. If you do not know what they are, you will not know when you are going to get paid. When is a payment overdue? You need to know in order to manage your cash flow properly. 30 days is a good general guideline, but you could make it less if you prefer.
Get Professional Advice
Don't struggle alone. Instead, get advice on your cash flow from a professional business advisory service. Their help can be invaluable and it can more than make up for the cost.
Send Your Invoices Quickly
Late payments are something you cannot control, but sending your invoices quickly is something that is in your hands. Invoice as soon as the work has been completed, and send it by email to the right contact. The longer you wait, the longer it will take to get paid.
Follow Up when Invoices Are Overdue
Don't hang around when an invoice is overdue, and follow up on it immediately. This will show your customers that you have a system in place and that you won't just forget about it. Be polite, and start with an email then follow up with a call. Keep a calendar and set reminders when payments are not made on time.
Provide Incentives for Faster Payment
Another option to consider is to provide your customers with discounts if they pay faster. A 5 per cent discount can go a long way to encouraging the customers to settle their invoices sooner.
Give Preference to Online Payments
It is always good business to make it as easy as possible for your clients and customers to pay you, so you should accept checks, bank transfers and credit card payments. However, emphasize your preference for online payments because they are much faster.
Get Clients on Retainer
This one depends on the services you provide, but it can work well if you provide an hourly service. Put your clients on retainer and charge them a fixed amount each month. They then pay for a certain amount of hours each month, and you can bill this in advance at the start of the month to provide you with more control.
Ditch Clients Who Don't Pay Fast
This is not always possible, but if you can be choosy about your clients, it makes sense to choose those that pay quickly, especially when you are starting out.
Manage Your Cash flow More Effectively
Don't suffer problems with cash flow when you are running a small business. These tips are simple to implement but can have a very positive impact on your business, so try out any that you are not currently using. That way you can ensure a healthy cash flow, and you can avoid potentially serious problems as a result.