1. Invoice quickly
Sounds obvious but it’s amazing how many companies are slack at sending through an invoice once they’ve completed a job. It should come as no surprise if you don’t send through your invoice until two weeks after you’ve completed the work, that payment isn’t forthcoming until another two weeks at least. Get in the habit of preparing and sending invoices straightaway. What’s more, send them by email and that way they will get to the relevant person immediately. And while you’re at it make it easy for the customer to pay the invoice by providing your online banking details.
2. Set clear payment terms
Make it clear to customers what your payment terms are. And although large corporates often have 30 day payment terms, this can be too long for some SMEs who can’t afford to be quite so generous with their terms. A more reasonable timeframe for the average small business could be 14 days. Whatever terms you plump for, set clear expectations for your clients.
3. Use technology to help you track cash flow
Technology, especially cloud-based accounting, has made it much easier to manage cash flow. Investing in reliable accounting software will be a great time saver and will allow you to focus your energies on other important tasks. What’s more, saving your accounts to the cloud means that you won’t have to worry about backing up your data and you will be able to view your accounts at any time, whether you on the road or working from home.
4. Focus on cash flow not profits
Many SMEs have made the mistake of focusing too much on profit projections. The truth is if your cash flow is in order, then it follows on that your profit will also be in order. The opposite, however, is not true. Even profitable businesses, need to have cash flowing through them to survive in the long term.
5. Consider introducing incentives or fixed rate payment packages
It late payers are a big problem in your business, then another way to keep cash flowing is to introduce incentives for customers to pay on time. You could perhaps offer a deduction off the total for full payment or a week free – whatever makes sense in your business.
Alternatively, how about offering fixed rate payment packages? And so, if a client pays for a whole year’s worth of services or product upfront, they get one month free. In this way you’ll be getting paid in advance rather than in arrears and the extra cash can help you explore opportunities and grow your business more easily.
Good cash flow management is critical to the success of your enterprise. And so give your business the best possible chance by using these tips and keeping on top of cash flow.