5 simple steps to improve your cash-flow


Cash-flow is the lifeblood of every business.  If you don’t have money coming in from your customers you won’t have money to pay the bills, so you can’t keep trading.  It’s a basic concept that we tend to follow in our own lives, but when it comes to running our business we do what we can to “get customers” and we leave the flow of money to look out for itself.

Many surveys of small businesses report that the problems encountered with cash-flow lead to concerns about the operation of their business. However, it needn’t be too taxing to put in place a few simple activities that will help smooth out the cash-flow pain.

Agree your terms of sale before you do the work

It might seem obvious, and it’s easy to not do it in the excitement of getting a new customer, but it really isn’t a closed deal unless everyone knows who has to pay what and when.  You don’t want to get the work done only to find out that your customer always pays on 60 days terms.  If you’d have known that at the start, you might have decided not to work for them, or you might have arranged to have longer terms on any payments you might need to make in order to deliver this work.

Invoice promptly and accurately

It’s often convenient to say “I’ll do all the invoicing at the end of the month all in one go because it will be quicker for me to crack through it when I’m in the invoicing zone”.  In reality what this means is that the customer who gets your service or buys your product on the 1st of the month, gets a whole month’s free credit because you won’t even raise their invoice for a further 30 days and then they have 30 days to pay it.  Great for them, not so great for you.

Invoice when you’ve done the work or sold the goods.  The sooner your customer gets the invoice, the sooner they have to pay it. And make sure they’re accurate so the customer doesn’t have an excuse to delay paying whilst you correct the mistake.

Chase up invoices that haven’t been paid

There’s no point raising all your invoices promptly if you aren’t going to chase them promptly.  Before the invoice is due, get in touch with your customer to remind them that payment is upcoming and check everything is OK for it to be paid on time.  This way if there are any issues, you can deal with it before the invoice becomes due.

Get in touch with them again once the invoice becomes due and get confirmation of when it will be paid.  And keep communicating if payment isn’t forthcoming.  This gets the customer into the mindset that they need to pay you to get you off their back.  If they think you’re not on top of things then they might not see your payment as being their highest priority.

Offer ‘pay now’ options so you can get your cash even sooner

Why wait 30 days to get your money when you can get your customers to pay by credit card and you get it now.  Yes, you might have to pay a fee to the card company, but is this really much more than any interest you might have to pay because you’re using an overdraft or financing the business on a loan because you don’t have cash on hand?

The other option might be invoice factoring, where a third party agrees to buy your unpaid invoices for a fee, and they give you a percentage of the invoice value up front.

It’s not for everyone, but can help get the cash in the door more quickly.

Think ahead and plan for the known and the unknown

There are always bills that come in throughout the year which don’t relate to your sales cycle or to a regular monthly payment, such as tax bills, or office refurbishments.  So make sure you are saving cash up to cover these activities when they’re due so they don’t sneak up on you and steal all the cash you were going to use for paying salaries or purchasing new stock.  Keeping a cash-flow forecast up to date will help with this planning.

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