Cashflow management is something of a delicate balancing act for small businesses. It requires careful management of time, clear terms and a concerted attempt to keep things as simple as possible. If you’re finding it hard to stay on top of your business finances, worry not – we’ve got a few top tips that will help you keep it all in check.
Clarity is essential when it comes to cashflow. Stating your payment terms both up front and in the contract ensures you’re covered should payment end up being difficult to get hold of. Many businesses will pay on time or after a follow-up reminder, but if things get tricky, you’ll need proof the terms were agreed to – i.e. a signed document.
Be clear with your accounts department too about which payments are due and when. A standard 30-day invoicing structure is fairly standard and keeps things simple for all involved.
Depending on the size and nature of your business, you may want to take deposits for projects to ensure some financial stability. No only does this mean you gain a commitment from the client to the project, it also means if their balance payment is late or they suddenly pull the plug, you haven’t lost out so dramatically.
Timeliness on your part can make a big difference to your cashflow circumstances. Not only is it important to deliver a project on the given deadline (of course, many jobs overrun for all sorts of reasons, and communication with the client here is key) but also with invoicing. Ensure your invoicing is done within a day or two of the completion of the task, rather than invoicing everything at the end of the month. This will help to fill gaps where funds may be running low.
Make paying easy
Making payment of invoices easy for clients will help to ensure they’re settled promptly. With so many online accounting systems, digital payment options and such available now, there’s little excuse for insisting on cash or cheques. Provide your bank or PayPal details on every invoice so that transfers can be made quickly and easily.
Put cashflow before profit
When you’re implementing a finance strategy it can be easy to focus on making a profit. But placing profits above cashflow will only set you back farther. Inflating margins or taking risks on larger, less reliable clients in the pursuit of profits can end in disaster. Instead, ensure you can cover your bills, salaries and insurances comfortably by working with reliable clients and keeping prices competitive. In the long term, it’ll give you a more solid foundation for growth.
Following these tips should set you on the right path to better cashflow management, but if you’re running a small business in the capital and need extra advice, contact one of the specialist business accountants in London. They’ll be able to help you with further techniques and strategies to ensure stability from month to month.