It’s not so Funny, Money, Money, Money
Business cash flow tips are always useful. Especially as cash flow can make or break a company – be it a start-up, or a small or medium business. If you don’t have enough cash to pay your bills things can very quickly become very sticky. 90% of businesses that fail do so because of cash flow issues!
“Work like you don’t need the money. Dance like no one is watching. And love like you’ve never been hurt.” – Mark Twain
While Mark’s sentiments are poetic and I’m sure we’d all love to live by that philosophy, unfortunately sometimes reality is a harsh mistress. Being a business owner puts too much pressure on to be so fancy free. Particularly when cash flow is involved… (By the way, I think I’ve got the dancing like no one is watching down!)
So, with that in mind, I thought I’d go through 4 business cash flow tips for how to avoid your business coming a cash cropper.
1 – Knowledge is Power
It’s true, knowledge really is power. If you don’t know what business cash flows, in and out, are how are you supposed to manage them?
Know what money is coming into the business, and what money is leaving the business. Track it, monitor it, understand it. Whether you use a simple spreadsheet or one of the many tech tools out there for businesses, monitor all the monies powering your business.
And forecast your cash flow; plot when you have to pay your bills and when customers are going to pay you to give you information about your upcoming cash flow. By doing this, you’ll know if things might become a bit tight before they do. And that’s something you can plan around.
If you’re struggling with any of that – finding a tech tool, setting up a spreadsheet, the numbers behind it all – then speak to your accountant for pointers and assistance. If you are looking as though things are going to become a little uncomfortable your accountant can also point you in the right direction for easing that difficult period. You might need a short-term cash fix, you might need a longer term one; there are many solutions available to businesses to help with funding.
2 – Cash is King
You may, or may not, have heard this term. The fact is, it’s true; as already mentioned cash flow can make or break a company. So, as well as knowing and monitoring your cash flow, the trick is to build a cash reserve. If you’ve got money in the bank and you hit a bump with sales, or a customer doesn’t pay you, if there’s a nice little nest of cash sitting in the bank it’s not going to disrupt your business at all.
The other trick to sensible cash management is to know who you’re working with. A new customer comes along and wants the largest order for your product you’ve ever had – fantastic! Before you plough right on and order in the materials to make said product, check your customer out. Credit check them. The last thing you want is to produce the most amount of fandangled, amazing product X ever, send it on to your customer…and then not be paid. Especially when your suppliers will still be knocking on your door expecting their money. There are a wealth of credit checking facilities out there use them! (We have this facility in place for our clients.)
3 – Action and Reaction
You’re an incredibly busy business owner, you juggle all aspects of the business from its core, to IT, marketing, sales – everything! Not matter how busy you are though, you need to invoice your customers and clients in a timely manner. Your customers can’t pay you if you’ve not invoiced them first. As soon as you can invoice, get it done and get it sent. The longer you leave it, the longer it will be until they pay you. Prioritise raising invoices. There are a number of systems available to make this task easier as well. Again, if you’re unsure speak to your accountant, they can direct you to tools that can help.
Once you’ve sent the invoice to the customer they have to pay it. Some companies genuinely won’t pay a bill or invoice until it’s overdue for payment and someone’s chased it. So chase it! Sometimes an email is all it will take, great! Sometimes though, you’ll send email after email and it still won’t be paid. In these situations the human touch is the way to go – give them a call. You’re much harder to ignore on the phone than on email!
4 – Ways and Times
If your customer pays you 60 days after invoice, but you have to pay your suppliers in 30 days, that’s always going to cause a problem. Work smarter, marry up your customer and supplier payment terms so you’re not having to pay people for stuff before you’ve been paid for it yourself. Sometimes this isn’t always possible for every customer or supplier, but with most of them there will be wiggle room.
And finally, make paying you accessible. Make sure you’ve got the facilities in place so your clients can pay you on time, or quicker. Do they keep asking to pay you by credit card? Get a payment by card facility. Does your client pay an annual bill? Is it easier for them to spread the payments over 12 months, so they pay you a little each month rather than a chunk at the end? Great, set up Gocardless for direct debits, or get them to set up a standing order. Do you do project work and your clients pay you at the end of the project, 6 months down the line? Implement staged payments, 10% on acceptance of the project, 20% for the project being completed to X stage and so on so you get paid throughout the project, rather than at the end.
Be smart. Knowledge is power. And if you’re really at a loss, speak to your accountant for help.
We hope these 4 business cash flow tips help you in your business!