It’s important when running your own business that you have a close watch over your cash flow to ensure it’s both healthy and stays ’in the pink’. How best can you do this? Here are 10 top tips…
- Budget, budget, budget – Budgeting for your business can be hard, but it is also extremely important as it allows you to plan for any future hurdles and possible windfalls. When creating your budget, think about the future. What might change? What will stay the same? Plan for both fixed and variable costs. Think about how you can cut costs too.
- Forecast the future – As well as budgeting, a forecast can help you to understand when you expect inflows and outflows of cash. With this in mind, you’ll be able to plan for outgoings such as tax bills and it will allow you to know when cash is not so readily available, meaning you’ll be able to act to try and help with this before it’s too late.
- Supplier payments – If you use suppliers such as freelancers, printers or even for stationery, they will have terms and conditions for when you need to pay them by. Try to haggle with them to extend the payment terms. This will help to keep cash in your bank for as long as possible, but don’t be mean as they need to pay their bills as well.
- Customer invoices – Just like with suppliers, you will have payment terms which require those who use your services or buy your product to pay within a certain time. To help with your cash flow, you will want to keep these to a minimum so where possible, make them 30 days. For some, you may even be able to use payment terms that are less than this such as 14 days.
- Those annoying, late payers – It is inevitable. No matter how hard you try to agree payment terms that will be best for your cash flow, there will be a customer or client who doesn’t pay on time. Make sure you have a plan in place to deal with this, maybe someone in the office who can chase the payment or an external company who offers a debt collecting service. If you do use one of these, make sure they are regulated by the Federal Trade Commission.
- Share with those you trust – If there are people that you trust and who you think would be an asset to your business, bring them on board through shares or selling them equity so they have a share in your organisation.
- Staff levels – It’s hard to get the right balance of staff for your business, especially if you are growing rapidly, but having too many full-time employees can harm your cash flow. Consider hiring part-time employees who might look to go full-time in the future or look at using more flexible resources such as freelancers.
- Product faults and warranties – Offering your customers a warranty for their product in case it’s faulty is a good idea but not if you are not unable to easily track when they purchased their product. Use a software to help track serial numbers so when a customer claims their product is faulty, you can easily see when they bought it and if it is still covered under the warranty.
- Too much stock – It’s difficult to know how much stock to hold because you don’t want to put customers off by products being out of stock but you also don’t want to have too much and for it to go out of fashion or date (and therefore not earning you any value). If you can, invest in software that’ll help with this because in the long-term, it’ll help with business efficiency and reduce your costs, increasing cash flow.
- Keep expenses under control – Another way software can help your business is by tracking expenses, especially if you have employees claiming for expenses too. If you can, try to charge expenses on to your clients as well, as this will help to reduce your reliance on your cash flow.
