One of the main issues in starting a business is a matter of cash flow. When finances are limited as the company is just starting out where do you pool your resources from? And what takes priority? It’s a hard balance to maintain especially when trying to get customers and clients while also at the same time keeping your staff on side. There are a few methods in which you can do this to give your business a head start and send you on your way.
Set Cash Flow Targets
A way to control cash flow is by preparing a cash flow forecast. You can update this on a weekly basis to provide and outlook for the near future, such as the next 6 to 12 months. If you set targets for the credit controllers, it makes sure that the necessary attention is paid to it. Also using a forecast for cash flow will give you an insight into the markets and trading trends. Using platforms like a forex trading platform will help in this instance.
Agree On Clear Payment Terms
If you establish clear payment terms right at the start, it will make it easier to manage your cash flow so you can prepare for issues like late payments. A standard in business is to set a 30-day limit. This works because suppliers and employees need paying on a monthly basis.
Make Payments Easy
For your customers make sure payments are as easy as possible. An example would be to avoid getting paid by cheque as this can result in many delays before the money arrives in the business bank account. Using online payments like PayPal are a much quicker and better option.
Invoice As Quick As Possible
Invoicing clients as soon as the work is completed is a quick way to encourage payment. So when the job is done, send it with the invoice attached so it arrives at the client immediately and you have a record of it being sent to them.
Use The Right Technology
Using the right accounting systems will make it a lot easier to manage your cash flow situation. Using cloud-based accounting is a great time saver. So it can free you up to focus on other aspects of the business that demand your attention. The great thing about cloud-based accounting systems is that it saves you the worry of backing up your data constantly. You are able to connect to it using a tablet, smartphone or laptop while on the move. It also helps business owners and entrepreneurs minimize annoying administrative duties that can take up a lot of time and effort.
Offer A Fixed Rate Payment Package
Another way to ensure cash flow is to offer payment packages on a periodic basis. This gives you a way to plan ahead, and you can get paid upfront instead of in arrears so you can plan your business growth and spending easier. It also gives you much-valued peace of mind.
Delegate An Employee To Monitor The Cash Flow
In small businesses, you have to be clever with your cash flow as you have a lot of substantial outgoings on a regular basis. As a result, your income can be somewhat unpredictable. To help you can train at a member of staff to keep an eye on the daily credits and debits to make sure there’s always enough money in the account.
Generate A Payment Arrangement To Reduce Days In The Black
The period between the invoicing and the payment is always difficult, but there are ways to minimize this. Such as establishing a direct debit as a business standard for collecting receipts. Doing this provides a stable flow of cash and reduces days in debt. Using a direct debit method is beneficial for customers because it removes the worry about paying regularly and on time while also giving your business a regular cash flow.
Have A Cashflow Plan
Lots of businesses on a small scale do not have cash flow plans, although they would have financial forecasts. This is a very simple way to make your business fail quickly. It is best not to be blindsided by profit margins, so I counteract this by working with reliable clients that pay quickly in the short term.
Keep The Bank Updated On Your Movements
As the bank will have a close eye on your ingoings and outgoings, it is best to keep them informed of unforeseen circumstances and changes in your financial forecasts.
Cash flow is always a tricky thing to maintain, but as long as you keep a close eye on your finances and get inspiration from these points, it will see your business past the first difficult 6 month period.