Top Tips For Maintaining Your Small Business Cashflow
As a start-up juggling multiple tasks at any given time, it’s easy to let the fundamental basics of running a small business fall by the wayside. Yet while brushing these things under the carpet may seem harmless at the time, the knock-on effect can have major consequences on the long-term health of your business – especially where cashflow is concerned. So much so that as a result of poor management (combined with the challenging economic backdrop), research from Xerox and PayPal revealed 37% of small UK businesses considered closing down completely this last year. To help you keep your cashflow in check, here’s a number of things you can do to streamline your operations and look to a brighter future.
Manage your payment risks
Money worries; every business has them. Yet while more established SMEs can afford to suffer the occasional hiccup, fledgling businesses are encouraged to assess their payment risk to establish their level of resilience should the unexpected occur. If you’re just starting out for example, it’s likely you’ll require payment up front if cash generation is a top priority. As a result, this could initially limit your market (where the majority of larger companies may prefer to pay upon completion), and thus demand additional incentives to enhance your offering – from early payment discounts to money off subsequent projects. Working at a reduced rate can open new doors and is a great way to build experience, which also makes it less costly for those making advance payments.
Create a cashflow forecast
While you’ll never know what’s round the corner, a monthly (or even weekly) financial forecast can give you greater visibility, alert you to any discrepancies sooner, and help keep your business on track. A good finance manager, whether internal or external, can help you monitor this and provide detailed reports and valuable insight to ensure you’re never left in the dark; if your budget doesn’t stretch that far, a number of cashflow management apps and software are also available, like Xero. Despite the fact you may be having your best month yet, acting as though you’re in a constant ‘cashflow crisis’ will ensure you maintain focus, never taking your foot off the gas. A cashflow forecast also makes it easier to keep track of overdue payments should they tend to arise on a regular basis.
Keep contracts ‘on the money’
You’ve finally closed that exciting new project, and the last thing on your mind is fussing over paperwork. But get the invoice wrong, and it could cause a number of problems down the line (resulting in payments made a lot later than expected). Take time to build a comprehensive template, and filling this out will soon become second nature; there’s resources online to get you started, but be sure to make it bespoke to your business. Terms and conditions are an essential tool designed to cover all elements of a transaction, which can even detail what happens should you not receive payment on time (or at all). Remember never to agree to any add-ons verbally (that aren’t included in the contract), and don’t be afraid to draft in a solicitor to help.
Invest in face time to avoid late payments
Whether you’re a bricks-and-mortar or digital business, you can’t put a price on maintaining face-to-face communication with your customers. With new clients, know what you’re getting into from the outset by assessing their credit situation so as to swerve the likelihood of any late payments – and make it clear you take creditworthiness seriously. Try to avoid online-only correspondence by investing time in human relationships – from suggesting a casual lunch meeting to a working day at the office. Not only will this help build trust and rapport with your customers, but it will also help you avoid the awkward situation of delayed payments in future (with faces put to names).
Trust the experts
If your finances should allow, enlisting the support of external expertise is one of the most sensible ways you can stay on top of your cashflow, saving you time, worry (and ultimately money). Here at Adams Moore, we understand peace of mind is key for the smooth operation of cashflow – at whatever stage of your business journey. Our team of friendly professionals are on hand to guide you in the right direction, from offering business start-up advice to invoice factoring to further drive growth. Contact us to find out more.