Anyone in business for more than 30 seconds knows that cash flow is the most vital part in keeping your doors open! I have been running this firm for 13 years now and it is still as true today as it was when we first started the firm in our laundry (you can read about that here)!
As I recently read in a Harvard Business Review article, “You can’t pay bills with profits—only cash”. The notion of cash flow isn’t a new idea however, it is one of the most important keys in keeping any business, large or small, alive and kicking.
If we don’t have good, consistent and secure cash flow coming into our business regularly, our businesses will grind to a halt fast.
While there are always factors outside of your control that will affect your business sustainability, I’m going to give you seven tips that will lead to more secure and efficient cash flow right now.
1 – Ask for a deposit or full payment upfront
My first tip is to ask for a deposit or full payment upfront before you start work. I’m sure we’ve all had the experience where you get a client who comes to you with a whole lot of work and expects you to drop everything and help them immediately and in the end, you find that they don’t have the money to pay.
That can be heart-breaking. This is why I think it is a good idea to try and get the full amount at the outset or at least ask for a deposit before you commence any work. This is a great way to ensure the client is able to pay their bill before you are out of pocket.
2 – Ensure you have clear payment terms & conditions
The second thing we like to do is we make sure that our clients are very clear on our terms and conditions of payment. We want these terms to be crystal clear – not confusing and ambiguous. All clients want to know when and how they will need to pay for your services. Having clear payment terms and being upfront with them is a good way to ensure you have an avenue to force payment if they end up being uncooperative (we can help with this).
3 – Invoice quickly and often
Another strategic tip is to follow up quickly with finalising and sending your final invoice. The sooner you invoice someone the more likely you are to get paid. If you leave an invoice for a long time your chances of recovering what is owed to you reduces dramatically.
In addition, make sure you follow it up promptly if payment hasn’t been received. For example, if you have ‘seven-day terms’, ensure you follow up on the seventh day and don’t feel bad about this! If you’ve done the work and you’ve done a good job, this is the reward!
Another tip is interim invoicing. If you’re working for someone over a long period of time, it’s okay to render invoices along the way so they don’t get hit with a large bill at the very end. The other benefit of interim invoicing is if they don’t pay one invoice, you can ‘put your pen down’. You can stop the work so that you don’t find yourself in a big ‘unpaid’ hole at the end of the job.
4 – Offer subscription style services
Another suggestion is to provide products via a subscription pricing model. The beauty of this is that while guaranteeing some payment, it lets you forecast and budget. There nothing is better when running a business then when you can actually forecast what the future looks like based on guaranteed income.
As a side note, the important thing here is making sure that you have very, very clear minimum terms for a subscription service. It might be 3 months, 6 months or 12 months – but make sure you have minimum terms set with clear terms on how a client can cease the subscription so that you don’t end up second best (if you need help with drafting your terms and condition, contact us below).
5 – Don’t devalue your product or service
Undoubtedly, the product or service you offer is something you have worked tirelessly to create and perfect and its important you place an appropriate amount of value on those efforts. I see many businesses fall prey to extreme sales culture or choose to undercut themselves when it comes to price. Discounted prices, when executed well, can help bring in more customers/clients but when poorly done, they can condition people to want more for less, mean less profit for the same work, cause people to wait until another sale goes live, and much more. Knowing what you are worth is such an important key to successful business.
6 – Reduce your outgoings
Keeping cash in the business means monitoring what payments are going out of the business. You should always look for opportunities to reduce your outgoings by streamlining practices and reducing operating costs. That might be by negotiating your lease with your landlord, or with suppliers for better buying opportunities, or just identifying and improving inefficiencies wherever possible.
7 – Improve your financial skills and get EXPERT ADVICE
There is no reason to go at it alone. You can of course learn many cash flow management strategies online or through other resources but accessing expert and tailored advice can be the best strategy to ensuring you make better decisions about cash flow management and achieve your business goals.
If you are able to put these strategies in place, I know you will have far more consistent and secure cash flow in your business.
If you are in business, we can help you with:
- Terms & Conditions
- Dispute Resolution Clauses
- Business Estate Planing
- Debt recovery
- Business Structure
Plus much more! Simply fill in the form below.[/vc_column_text]