Small business cash flow is a challenge for any business but for a small business where the owner, and most of the staff often wearing two – or more – hats, it can be downright elusive. Your business plan likely involves details on how to grow your sales and manage your day-to-day operations, but have you focused on ways to keep an even stream of revenue coming? If not, you must, and now.
Here are some simple steps you can take today to improve your small business cash flow:
Billing – Your bills must be clear and concise. They must be accurate. They must be sent promptly and regularly. Make certain you have the right contact for billing since the person who hires you may not be the person in charge of accounts payable. Ask customers how they would like to receive bills – paper or electronic. Billing may seem like a simple issue, but so many small businesses owners get it wrong.
Credit – Offering credit terms can give your business a competitive edge. However, not every customer deserves credit from you, and not all customers should have the same credit limit or terms. Establish guidelines that work for your business and your customers. If you need an idea about how to do this, think about how your bank treats you when you go for a personal of business loan. They collect information from you, examine it, and make an informed decision.
Deposits – Obtaining some money at the start of a project is a smart idea that can not only give you some cash flow, but with some “skin in the game”, your customer becomes part of the procedure. Any customer who enters a payment plan should be required to provide an initial deposit. Document all payment plans and make sure customer approves of them.
Payment Plans and Methods – Make it easy for customers to pay you – whatever it takes. Well documented payment plans are a good start. Experiment with different methods of payment that work with your customer base. Some customers still pay bills with a paper check, and sending them an envelope every month will keep them on track. Other customers want to pay online, with PayPal, ApplePay or another method of payment. Know your customers and work with them to keep payments regular.
Receivables Management – Do you know how much money you have outstanding at any given time? It is important to have a handle on your outstanding accounts receivables. Stay on top of them, and plan to recover any delinquencies.
Small business cash flow need not be a mystery. It is all up to you, and the steps you take to get there.