Congratulations on starting out on your own – the big step you’ve taken is already an incredible achievement, and nothing will beat the freedom of being your own boss. As with all new ventures, setting up your own business will come with some learnings, especially if it’s just you for now. Getting to grips with your cash flow is important, and the following tips can help ensure you get off on the right foot.
1. Set firm payment terms at the beginning
It’s important that your business sets firm invoicing terms at the very beginning, this will ensure that your clients or suppliers know where they stand and ensures that you know what to expect too. Being clever with your terms can ensure that your cash flow doesn’t suffer. For example, you could agree longer payment terms with your suppliers, but give your clients stricter terms to ensure that you aren’t left with gaps between incomings and outgoings.
2. Stay on top of all paperwork
Cash flow problems can arise when businesses fail to stay on top of their paperwork. For example, if you send out invoices late, you could delay receiving payments. To prevent this from happening, you can hire freelance administrators or even invoice financing companies who can pay you a portion of your invoice in advance and ensure that you aren’t left waiting for payments to come in. For basic help with cash flow, Microsoft Office comes with some excellent tools and templates to get you started.
3. Maintain a good credit score
Should you get into difficulties, you may need to rely on a credit loan to help keep you afloat. A good credit score is vital though, and it’s important that you maintain good links with your banks. Make sure that all of your bills are paid on time and that any loans are repaid on the agreed terms. Failure to do so could affect your credit score and make it difficult for you to secure additional funds if you suffer cash flow problems.
4. Credit check your clients and suppliers
Just as it’s important for you to maintain a good credit score, you must also ensure that your clients and suppliers have good credit scores. Knowing what they are will help you make good decisions about who to do business with as well as who to avoid, and can help you to avoid risky situations that could be damaging to your business. Having a cushion should you encounter problems is an example of common cash flow advice and is something you should secure before you establish your business.
5. Get professional help
Unless you’re already an expert in finance, you should make the wise decision to seek professional financial help to help you manage your cash flow. An accountant can help keep your books in order, and as you are a small, new business, you won’t need a full-time accountant to manage your finances, meaning your initial costs will be low. If your business grows, you can then consider hiring someone one a more permanent basis.
Cash flow problems are common amongst new businesses, but with useful advice, you can identify the cause of your cash flow issues and resolve them. Do your research and safeguard your new business to get you new venture off to the right start financially.