Cash flow is the life blood of your business!
The cash flow of your small business relies on your customers paying your invoices in a timely manner. Unfortunately, this doesn’t always happen, and it can have severe consequences for your business. So, what can you do about it?
Here are some other tips to help get your cash flow back on track.
Discuss your terms at the time of engagement.
Discussing this right at the beginning of the relationship removes all room for confusion down the track, and your customer knows what your expectations are with regard to payment, right from the get go.
Keep detailed records.
Not only does this mean that you’re actually charging for everything and not missing out on any revenue, it also means that if there is a dispute you’re got accurate and concise records that can be backed up. This will also allow you to provide “work in progress” invoices, or review and discuss price should the job blow out, instead of sending a large invoice at the end of the job and having the customer get a not so pleasant surprise.
Your invoice should be clear and easy to understand.
Your invoice should make sense to the customer and don’t leave any room for confusion on the customers part, which may cause a delay in payment.
Set appropriate payment terms.
Your terms have a large impact on when your customers pay you. If your terms are 30 days, typically you will be paid two weeks late! What does that mean for your cash flow – you still have your own suppliers to pay, and your staff, and yourself! So if you’re aiming to get paid within 30 days, should you change your terms to 14 days?
Make sure your invoice goes to the person responsible for paying the bill.
So much time can be wasted sending your invoice around the office to every Tom, Dick and Harry – but not to Sally, who actually pays the account! If you’re not sure who to send it to, call and get the correct details.
Email your invoice and do it ASAP.
Emailing your invoice avoids the delay of snail mail, and you can see that it’s actually been delivered. Not to mention the cost benefit! The longer you take to send your invoice, the longer it will take to get paid! As soon as the job is complete, or that portion of the job is ready to invoice, get it sent off for payment.
Keep on top of your debtors and outsource.
When things become overdue, send reminders and make phone calls to remind your customers that you do expect to be paid for your work, and in a timely manner. People generally don’t like to be chased for money so if you’re known to be somebody who “hassles” them for payment, you may get paid before you have to! Chasing your customers for payment can sometimes be a little delicate and generally business owners don’t like to do it. But what happens if you don’t do it? You may not get paid! If you have to, outsource this task to somebody who doesn’t have an emotional attachment to the money and you may be surprised how quickly your debtors get tidied up!
Make it easy for your customers to pay you.
Why not put direct debit facilities in place? This means that you get paid on time, and the customer has the convenience of it just happening for you. There are a number of companies where you can get direct debit facilities set up and it’s very easy and cost effective.
Good cash flow means good business!
There’s a misconception that because you’re busy your business must be doing okay. A strong indicator that you’re maybe not going as okay as you think is good income, but nothing ever left in the bank. Maybe you need to look at your spending; maybe you need to review your income; or maybe you need to analyse your productivity. There are a number of factors that can affect your cash flow but if you get the basics right you’ll be on your way to improving the cash flow of your business!