Picture the scene. Your customers can’t get enough of your products or services, you want to embrace growth and take on more projects. ‘Cash is king’ and is the lifeline of all businesses.
But there’s a problem. The long payment terms set out by your customers mean that cash flow is tight. So, how can you manage your cash flow better? We’ve put together our top tips for businesses to maintain healthy cash flow and keep growing.
1. Be aware of customer payment practices
You’ll be able to manage the payment terms of your customers better if you plan. Ask questions and do research before you strike up new trading relationships. Even without long payment terms in the picture, all companies have different payment habits. Maybe your customer pays everything on the same day each month? Perhaps it’s on an ad-hoc basis, which poses different challenges. You need to know.
2. Prompt invoicing
It seems like a no-brainer. If you don’t invoice your customers you can’t maintain your cash flow – but it’s easy to fall behind on issuing invoices when you’re already being pulled in a lot of direction, and that just causes further payment delay.
Make sure one person takes ownership of invoicing. If you’re a small business it might not be somebody’s entire job but set aside some time every week to prepare and send invoices. Keep an organised filing system so that you have everything to hand; using cloud accounting will streamline this process. Lots of cloud accounting systems have built in invoice systems; you can create, log and chase invoices within the software.
Finally, check for mistakes. You don’t want to fall foul of the processing system in a large organisation. Simple errors can lead to weeks of delay.
3. Pay smartly
Cash flow management for a growing business can be a delicate operation.
To get ahead, timing is crucial: don’t pay all of your bills at once. Instead, spread your payments out based on the level of importance and your priorities. Things like utility bills, salaries, rent should be at the top of your list and tend to be less flexible. If you build a good relationship, wholesalers, suppliers and vendors for small businesses can be flexible on payment schedules. Just ensure that there are regular payments and you keep them abreast of the situation with open communication.
4. Make use of technology
Advances in technology have transformed the way that businesses are run. Managing cash flow with Excel (or, Heaven forbid, on paper) is time consuming, inefficient and more easily susceptible to errors.
Consider using a cloud accounting service like Xero, Quickbooks or Sage50 to make keeping track of your finances and invoicing easy.
An added bonus of this software is that it’s designed to work on your tablet and mobile as well, so you can be up to date with your financial situation 24/7.
5. Make it easy for customers to pay
For most businesses, paying online is a significantly better option for making payments.
It’s simpler, faster and easier to track, for both parties involved. If you’re waiting a long time for payment make paying you as pain-free as possible for customers. It also helps towards creating a positive consumer experience, making customers more likely to do repeat business.
At MarketInvoice we’re determined to ease cash flow pressures on small businesses. We’ve brought together experts in credit control, cash flow forecasting, small business accounting and invoice management to build a great cash flow toolkit for your small business.