Keeping cash flow positive
...and how to get paid on time
Positive cash flow is critical for small businesses to stay afloat. Even if business is good, customers are plentiful, they are happy and they’re spreading the word, if they’re not paying you on time, your business can quickly become unsustainable.
Here are some things you can do to encourage more of your customers to pay on time:
Get to know your customers – personally and professionally. People are more likely to treat each other well if they a have a personal relationship and this includes paying bills. Professionally – do your research before signing up new clients. It’s amazing what a quick Google search and a social media scan can turn up. If there are complaints about the business, you’ll find them there. Also make sure you have all the contact details you need and update them regularly.
If your business is too small for a finance department, a generic email address, such as firstname.lastname@example.org, can help to encourage other businesses to take you seriously. Also, where you can, automate. Cloud-based accounting software makes light work of invoicing and reminders. But when push comes to shove, often it’s the personal touch (like a phone call) that gets the job done.
Set your terms and play by the rules.
Knowing your own business, and sometimes knowing your customers’ too, will help you to set up payment terms that work. It could be anywhere between seven days and a month. You could even request a deposit to ease cash flow pressure. For large and/or valued customers, if you understand their payment cycle, you can adjust your own payment terms, or at least understand when you’re likely to see the money.
Stay on top of your own finances.
Ensure your bookkeeping is impeccable. You should be able to find out who owes you what at any given time, and whether it’s overdue or not. You should also be able to easily identify serial offenders. If your own bookkeeping is sloppy, then you should expect nothing more from your clients.
Don’t be afraid to talk money.
After all it’s what business is all about – and do it sooner rather than later. If you are in regular contact with a late payer, don’t be afraid to talk about. If you leave it too long, it becomes more and more of a problem.
Do unto others as you would have them do unto you.
If you want people to pay you promptly, then make sure you invoice them promptly. Likewise, if you want to be paid on time, make sure you pay others on time too. It’s karma.
Check out our; Six financial tips for small business owners.
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