The uncertain economy has made it absolutely vital for small businesses to manage their cashflow as effectively as possible. Poor cashflow planning makes it easy for a small business to lose track of their finances and they can very quickly run into some serious problems that could threaten the future of their business. Here are some tips to help you avoid a situation like this:
Continuity sales: One way of ensuring future income (and thereby make it easier to predict cashflow) is to offer products or services on a subscription basis. Almost all types of products and services can be sold this way, simply by offering small discounts to customers that pay upfront.
Money management: Excess money sitting in your business bank account is doing very little with the interest rates currently so low. Investigate whether the money could be better utilised to pay off business loans or investing elsewhere.
Fast collection: Do everything in your power to make it easy for customers to pay you. Consider ditching the “snail mail” altogether when it comes to customer invoicing and encourage them to pay electronically. Be very clear when stating terms and the penalties for late payment.
Slow payment: The reverse is true when it comes to paying your own bills. Try to leave it until the latest possible date. It may seem sensible to stay on top of your bills by paying them quickly, but this is just poor cash management.
Use software: The whole process of cashflow management is made much easier with the use of cashflow planning software. It allows you to keep track of who has paid you and then chase up all of those who still haven’t.