5 steps to improve your business cash-flow
March 18 2022
Cash-flow is the lifeblood of every business. If you don't have money coming in from your customers you won't have money to pay the bills, so you can't keep trading. It's a basic concept that we tend to follow in our own lives, but when it comes to running our business, we do what we can to "get customers" and often leave the flow of money to look out for itself.
Many surveys of small businesses report that the problems encountered with cash-flow lead to concerns about the operation of their business. However, it needn't be too taxing to put in place a few simple activities that will help smooth out the cash-flow pain.
Agree your terms of sale before you do the work
It might seem obvious, and it's easy to not do it in the excitement of getting a new customer, but it really isn't a closed deal unless everyone knows who has to pay what and when. You don't want to get the work done only to find out that your customer always pays on 60 days terms. If you'd have known that at the start, you might have decided not to work for them, or you might have arranged to have longer terms on any payments you might need to make in order to deliver this work.
Invoice promptly and accurately
It's often convenient to say "I'll do all the invoicing at the end of the month all in one go because it will be quicker for me to crack through it when I'm in the invoicing zone". In reality what this means is that the customer who gets your service or buys your product on the 1st of the month, gets a whole month's free credit because you won't even raise their invoice for a further 30 days and then they have 30 days to pay it. Great for them, not so great for you.
Invoice when you've done the work or sold the goods. The sooner your customer gets the invoice, the sooner they have to pay it. And make sure they're accurate so the customer doesn't have an excuse to delay paying whilst you correct the mistake.
Chase up invoices that haven't been paid
There's no point raising all your invoices promptly if you aren't going to chase them promptly. Set up customised reminders in bzTrack, so customers who are known to be late payers receive a reminder 14 days before payment is due and another one 7 days before and one 3 days before.
Offer 'pay now' invoicing discount options so you can get your cash even sooner
Why wait 30 days to get your money when you can get your customers to pay now?!
With bzTrack, you can set offer discounts on invoices that are paid early which is a win-win for both parties — giving them money off and giving you a boost to your cash-flow.
The other option might be invoice factoring, where a third party agrees to buy your unpaid invoices for a fee, and they give you a percentage of the invoice value up front.
It's not for everyone, but can help get the cash in the door more quickly.
Think ahead and plan for the known and the unknown
There are always bills that come in throughout the year which don't relate to your sales cycle or to a regular monthly payment, such as tax bills, or office refurbishments. So make sure you are saving cash up to cover these activities when they're due so they don't sneak up on you and steal all the cash you were going to use for paying salaries or purchasing new stock. Keeping a cash-flow forecast up to date will help with this planning.
Take a look at our video to see how bzTrack can help your business.