Cash is king as the old adage goes, and business owners know that Cashflow is king. So if cashflow is the lifeblood of a business why is it that so many businesses struggle with cashflow? In fact it is the number one issue for small businesses and can be the element that forces businesses to be unsustainable.
So how do you break the mould and get your cashflow to work for you instead of against you? It is actually more simple that you think!
1. Don’t let it go till it is paid for
Unless you are in the business of providing finance to people then don’t be a credit provider. Don’t release the goods till they have been paid for! This is the number one way to make sure that cash flow is healthy.
2. Take a deposit
If you need to buy or pay for a large volume of materials in order to complete a job then make sure you take a deposit from the client. This ensures that they are committed to the purchase and gives you the cash to start the job. Have a clear understanding of when the final payment or payments will be paid. You can also have progress payments along the way at agreed points in the progress of the job.
Unless you are in retail and the sales process is simple, consider having a contract with your client. A contract protects both of you and should outline what services you will provide, when and for how much. It will outline the fees payable and when. Ensure that you also have a clause that explains what will happen if the payment isn’t made by the due date (such as interest payable). If you provide a similar goods or service to most clients then a lawyer will be able to create a template for you to use multiple times for different clients making the process cost effective for you.
4. Make payments easy
If you want to get paid on time make sure that you make paying you easy! Provide more than one payment method to ensure that the customer has a way that suits them to pay you. This includes accepting credit card payments, while there might be a small fee for doing so it can mean that you get your payment far quicker than if you insist on bank deposit or cash. From a cash flow perspective getting the money now may be more important than the couple of percentage that you would need to pay as a merchant fee.