When you’re running a business, the blood that’s running through the company veins is the cash flow. It’s perhaps one of the most difficult things to deal with, what a lot of stress is often about and what can make or break a commercial enterprise. In this blog we’ll give you a few tips to keep on top of your cash flow which will result in good health for your business.
To begin, let’s nail down exactly what cash flow is. It’s the money coming into and out of the business. Quite often it might only seem like cash is running out of the door, flowing downstream like river rapids, but for a business to work it needs to flow both ways. Customer or client payments for your services or products is your money coming in. Your money going out is to pay for rent, machinery, bills. Basic sense shows that if you have less money coming in than going out, you’re not going to survive. This is why it’s important to keep on top of the ebb and flow of your cash.
When you start your business you’ll more than likely have more expenses to outlay than customers to buy your products. You need to set up and invest at first. This means that you must keep a close eye on what you are spending and how you are spending it. You must also have enough cash to cover your outgoings whilst you gain clients and your business grows through infancy. Having a business plan and budget to cover these first few months is a great idea.
Send the invoice as soon as you can after the product has been sent or the work has been done. This puts the ball in the court of the client and they then have to pay you. There’s no point in having invoices sitting in your out box or waiting to be posted when they could be with the customer, working their way through their payment systems. Make sure your invoice has all the information on it that they need. This will avoid any delays and that way, you’ll be paid quicker.
Your payment terms should also be detailed on the invoice and you could also mention them in the email you send, with the invoice attached. With electronic payments it’s much more acceptable to have shorter payment terms these days and if you can always add an extra way of how clients can pay you aside from bank transfer. Paypal works quickly and can keep your business flowing. Other options are GoCardless and Stripe. We can help with the setup of all of these.
Invoices can go amiss or fall into the ether that is the internet occasionally. Sometimes the person you send the invoice to may be on holiday or off work sick. Be sure to follow up any unpaid invoices quickly. Drop an email over and if you don’t get a reply, don’t be afraid to pick up the phone and ask to speak to someone in accounts. It’s harder for people to ignore you when you’re on the phone to them.
You’ve got to think, until they have paid you, you’re paying for the product or service you’ve provided. That is money out of your business account, cash that isn’t helping your business grow and food that is not on the table for your family.
One of the best ways to keep on top of your business cash flow is to ask your bookkeeper for a cash flow report. This will detail exactly how much money is coming in and out of the business, in monthly, weekly or maybe even daily numbers. Your bookkeeper will be able to go through it with you and perhaps you’ll be able to find places where you can cut back on outgoings and boost those incomings, keeping your head well above water. For cash flow and bookkeeping help, contact Clare at Bruton Young Bookkeeping here.