Tips For Managing Cashflow
A recent survey from Federation of Small Business showed that 60% of all small business finance being raised was to fund cashflow. A separate report showed the average debtor book of an established small business was now over £100k. That is a lot of money owed and a big headache for most small businesses.
What to do? Here are some quick tips to better manage cashflow.
It Isn’t Always Fair
When trading with a customer who is bigger than you don’t expect things to be fair. Your invoice terms will probably be ignored and you will be paid as it suits them. In this case make sure that;
- Your invoice is correct, everything is dated, detailed, the numbers and description of work is 100% correct
- The invoice is addressed and sent to the right person
- Chase up as you would do with anyone else
Whilst there can be little you can do to hurry things along, by getting it correct at the outset you will save your invoice sitting in a disputed pile or getting lost in the ether.
If you are still typing out an invoice, posting it and putting a note in your diary to chase it up then stop! You cannot afford to have dated or time consuming systems. Get organised, get a decent bookkeeping system in place. Systems like Quickbooks, Xero or Freshbooks all offer cheap and really good ways to run your finances. You really cannot afford to be making life more difficult than it needs to be.
A Client is Someone Who Pays
Let’s remember that there is nothing wrong in expecting to be paid. If you have ever thought it is just you who pays their bills on time then stop. A good client will pay, agree terms with them that work for both of you but never back away from insisting in being paid.
It is easy to fall into a trap where the promise of future sales from a client becomes your justification for letting payment times slip. If you are not getting paid you are not getting paid, doing more work and not getting paid will only ever create a bigger cash flow headache.
Set expectations and follow them through.
Managing cashflow is never easy and there will be times when financing your cashflow is both essential and the right thing to do. Don’t assume that overdraft if the only, or best, way to do things as it rarely is. Cashflow goes beyond just the here and now. If you want to look at your cashflow options then get in touch and I will talk you through it.
By Dave Farmer