When it comes to business, cash is king. It is the lifeblood of any small business and without enough cashflow it becomes impossible to pay off debts or purchase stock, resulting in a vicious circle that can be hard to break with seeking financial help. The best defence against this scenario is good cashflow planning. Here are some of the basics:
Budget: If you are doing well, it is tempting to spend money on things that you believe will benefit your business. However, it is very important that you stick to your original budget for the year because things can go wrong very quickly in business.
Invoicing: The key to maintaining the best possible cashflow is better invoicing. If your invoicing procedure is not very well managed then there will be a delay in getting the invoice out to your clients.
Incentives: In order to get customers to pay quickly you need to offer them some sort of reason for doing so. Early payment discounts are the best way of doing this. Without these, most companies will not pay a penny until the deadline.
Paying your bills: Although you want customers to pay as quickly as possible, you should do the exact opposite when it comes to paying your own bills. Unless there is some discount offered you should pay as late as possible.
Reporting: With good financial reporting it is possible to forecast quite accurately how much cash you expect to have at various points during the month. Use software that has a cashflow tool (such as WinWeb’s Business Planning application) for the best results.