Cash is King! Money in and Money out
As a business owner, you are responsible for the financial stability of your business. Most often that responsibility translates into increasing revenue and improving profit margins, however, the day-to-day stability of your business is dependent upon the healthiness of your cash flow. In the simplest terms, you are responsible for ensuring that money is coming in faster than it is going out. Every small business owner struggles with cash flow challenges at one time or another whether it is due to a tight economic climate, undercapitalized start-up, unexpected expenses or planned business growth. Growth costs money.
Here are some immediate actions you can implement to minimize cash flow challenges and maximize financial opportunities:
- Invoice as soon as possible; immediately is preferable! Weekly is okay but the sooner you invoice the sooner you can expect payment.
- Set and communicate your payment terms as upon receipt or 10 days rather than 30 days from the date of invoice. Very few people pay before they are asked to so you need to state your expectations.
- Follow-up on default payments as soon as they are past due. Be sympathetic but not lenient. If your payment terms are 10 days, give a reminder on day 12 don’t wait until the end of the month.
- Deposit funds into your bank as soon as you receive them. Daily deposits don’t hurt. You never pay as much for deposit transactions as you do for overdraft interest.
- It is your job to make it as easy as possible for your clients to pay you:
- Offer the option to pay by Credit Card. Plastic payment makes cash flow faster and added bonuses for your client may include incentives such as free Air Miles. Remember! You will pay a credit card merchant fee so be aware of your profit margins.
- Announce and accept electronic payments, Set up automatic payment facilities, Consider online payment options, Include a postage paid envelope.