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Your income to expenditure looks great but how come every month is an uphill battle to pay bills and make things balance?
Cashflow is the biggest killer of small businesses, especially in the current difficult economic times. Few lenders are keen to issue an overdraft – however short the period you are suggesting. So the only real solution is to better manage your income and expenditure.Â Here’s a our top six tips on making sure you stay on top of your cashflow
1. Remember cash is king
Without cash or money in your company your business has failed. Whether you are owed it or not, if you don’t physically hold it your hands are tied and your business is restricted. Cash keeps your business alive, removes additional stress and allows you to be proactive to whatever situation arises. Manage your cash wisely, keep reserves and treat it with the care and attention it deserves.
2. Love your cash balance
Well at least treat it as if it were your lover. Keep it close to everything you do. Know your cash balance today, tomorrow and in six months time. Only with an accurate cash balance can you make accurate business decisions. Over-committing today for a project paying months ahead could be disastrous if you won’t have cashflow from somewhere to cover that transitional period. Always plan with your cash balance firmly at the front of your mind, not doing has seen the demise of many promising businesses in the past and will continue to do so.
3. Work as it comes in
Don’t hold off in expectation of some other work coming in. If the work isn’t time specific and you can get it done now, do it. Few people will complain if you deliver before a deadline and by meeting deadlines you know you have done everything you can to keep to your cashflow plans. Billing on time is the most important step in staying on top of your cashflow.
4. Work with customers
It’s something of a self-fulfilling prophesy but if you treat your customers well, look after them and build good relationships with them, you will probably find being at the forefront of their mind should eliminate any late payments and unforeseen cashflow issues. Equally if you have no cashflow worries you will have more time to focus on the customer and building that relationship and enjoying running your business. A more positive you will also lead to better business and more income, hopefully eradicating all cashflow worries.
5. Use staged payments
This works both ways. Try to stage your outgoings as well as your invoicing. It obviously makes it easier to plan cashflow around, but it also offers additional touchpoints for you with the organisations you are dealing with, so again building up the relationship and making things a bit easier when times are tough.
6. Keep on top of bills
Cut your expenses where you can. Keeping an eye on the negative cashflow makes for managing the positive cashflow much easier. Equally while we don’t avocate late payments, if a bill says due in 30 days, pay it in 30 days not 3. Of course your cashflow should mean you already have that money to one side to settle the bill when it does fall due, but it also makes sense for you to have the benefit of your money until deadline for payment.
That’s six ways to manage your cashflow – and we know there are more – but keep an eye out for our article later this month on our tips on jugging and maximising your cashflow too.