Most businesses experience cashflow problems from time to time. However if cashflow is a problem for your business more than just occasionally you may want to take action to prevent it happening again. It’s very easy when you run into cashflow problems to blame your customers, the market and your competition, however take a good look at the way you are managing your business finances, could the problem actually lie with you?
When you run a business there are so many tasks you need to undertake that it’s easy for something to slip. So check out my 5 top tips to improve your business cashflow in 2016.
1. Are you the problem?
It’s very easy to blame business cashflow problems on our customers or clients for not paying us on time. However if you dig a little deeper you may uncover that you did not invoice promptly for the work you undertook. Then when you add payment terms into the equation, it can be ages between you completing a job and actually getting paid for it. It’s very easy to get sucked into doing the work but this can’t be at the expense of actually getting paid for it, or you will soon not have a business. So ensure you really understand where the route of your problems lie, only then can you fix it.
2. Create a clear payment Structure
Make sure you and your clients very clearly understand your payment terms. Once they are set, you need to take action to ensure you implement them (we will talk about this in a second).
Here are some simple ideas that will assist with your cashflow and add more structure to your payments.
- Commencement Deposits: Depending on the service you offer, you may be able to charge a % of the project fee before you begin the project – like a deposit. This will help identify genuine customer and really improve your cash flow. Most customers will be happy to pay an initial payment, it demonstrates goodwill from both sides.
- Interim payments: If you have a long process from start to delivery of the final product or service, you may want to consider interim payments at specific stages of the project. This will help minimize bad debt and also assists your customers to manage their cashflow, whilst improving yours.
- Invoicing Practices: When you deliver the final component of a project, invoice immediately. Not once a week, not once a month—when something is delivered. We have to pay for most everything else in life when we purchase it or take delivery—why do we treat the services we provide for others differently?
- Set up recurring invoices: If you have clients who pay for a product or service in monthly installments, set up recurring invoices, that way you don’t have to do anything to ensure you get paid.
- Direct Debits: Take the concept one step further and set up a direct debit system – this is easy and affordable with providers such as Ezydebit. This way you don’t even have to wait for them to make payment, the money is automatically collected every month and paid into your account.
- Weekly Status: All the systems in the world will not help you unless you ensure you are on top of everything. So every week, maybe Friday morning open your invoicing system and review what’s come in and what’s outstanding, then take action to chase overdue invoices, or send any that have been overlooked.
3. Get Help
If you are honest with yourself and know that sticking to processes, checking on payments and chasing outstanding money is not something you will do religiously, then simply get someone to help you. A bookkeeper will do this for you and make sure your finances are kept up-to-date, they will also plan and schedule payments to your suppliers, helping to further smooth your finances. A good bookkeeper does not have to cost you the earth, we have a bookkeeping division here at Omnis Group headed up by an accountant and charge just $40 ph. We have achieved this by harnessing the power of technology to make our bookkeeping process more efficient and then passed the saving on to you.
Also get an accountant who will work with you throughout the year, not just lodge your tax returns once a year. Through this close working relationship a good accountant will be able to advise you when and how to take action to reduce your tax liability, identify opportunities within your business and advise you on process and system improvements that generate efficiencies. All of this will save you time and money. When you work with an accountant at this level the cost savings and opportunities they identify should out weight their costs. Again improve your cashflow.
4. Embrace Technology
If you are currently using a spreadsheet to manage your business finances, or are stuck using an old desktop based accounting system, you are making your life far more difficult than it needs to be. By harnessing the power of the latest cloud technology you can generate efficiencies and get an easy to use accounting system that you can use at any time, any-where, on any device. Putting you in complete control of your business finances.
With cloud accounting systems from just a few dollars a week, creating efficiencies in your business accounting has never been easier. Speak to us today and we can talk you through the latest cloud accounting solutions and add-ons to catapult your business into the 21st century, save you time in your accounting and help you get paid faster.
5. Eradicating the Headaches
Some clients will never (ever) pay on time. So you have two options. Option one is to get rid of them, freeing up your time to service clients that will pay on time. Or option two is to make it worth your while them paying slowly. Try establishing early pay discounts and late payment penalties, this may move some of you slow payers into the quick payer category, however if they insist on paying late there is a cost to them and a benefit for you.
If you are concerned about your business cashflow it can make running a business more of a headache than it needs to be. Once you experience what it’s like to be on top of your cashflow you will never want to go back. Call us today and we can catch up for a FREE no obligation coffee and take a look at some quick ways you can improve your finances today.
You may also be interested in downloading our free EGuide – Dealing with cashflow problems