Tips for managing your cash flow in 2017
Good cash flow keeps a business alive, poor cash flow can sink it. In fact, poor cash flow is a big reason why one in every four businesses doesn’t make it past the first year, and why more than half don’t survive past the fifth.
The beginning of the year for any small business can be a tough time for your cash flow as its usually a quieter time after the festive rush. Managing your cash flow in this period is a vital part of your business and will help set you up for the year ahead.
Keeping good records of transactions using SEplus can be a massive help to keep track of cash flow. You can quickly and easily identify money owed to you and what is due to be paid helping reduce cash flow problems. For most businesses, the only real way to maintain strong cash flow is to have some form of accounting system in place and keeping it up to date.
Make sure you invoice promptly as this is one of the major factors in enabling you to get the invoice paid quickly. Try to invoice as soon as the work is completed. If you leave it late then you may well not get paid for 60 or even 90 days due to the timing of issuing the invoice.
Sync Credit Terms
If customers have 30 days to pay but your suppliers want payment in 14 days then negative cash flow can build up and get worse over time. Renegotiate terms with your suppliers to work better with the agreed terms with your customers.
Clear payment terms with your customers is vital to business success in managing cash flow. Don’t be shy in bringing up the subject of payment. Cash is king when growing a small business.
Bad debt (amounts owed that cannot be recovered) will cripple a business and can easily occur if you have poor record keeping. Having a credit control system in place and good record keeping will help reduce bad debt.
To reduce the likelihood you could conduct credit checks on your customers before you offer them credit. If a customer has a poor credit history and you want to take them on ask for a deposit up front or issue partial invoices they can pay as the work is completed.
Pay Attention to the issues above.
New and growing businesses typically face some of the issues raised and paying close attention and developing good record keeping and solutions will all help keep the cash flowing in and make your business a success.