Managing the cash flow of your business is essential for success. Poorly managed finances can have dire consequences, such as unpaid bills or underpaid employees – issue which could get you into legal trouble for as well as financial.
To avoid the worst, it’s worth taking the step to forget cash flow issues in your small business with these easy tips and keep yourself (and your business) in the black.
Remember: You can’t see into the future.
No matter how reliable or lucrative a client or contract has been in the past, there’s no guarantee that situation will remain the same.
You may be tempted to ‘pre-spend’ your money, but it’s best to avoid this and only use what you can touch. By taking the precaution, you won’t run into any nasty surprises or excessive charges if there’s a delay in your payment or a client backs out.
Don’t start work without a down payment.
Have you ever completed a project, only to have the client disappear without a word? Too many small businesses get burned this way, but it can be easily avoided by taking a down payment or deposit.
A percentage of the payment upfront will also ensure you have money to keep you afloat whilst the work takes place, allowing you to keep up with your bills, employee payments and business expenses.
Keep tabs on your payments.
While you may be used to paying all your home utility bills as soon as they’re received, you may not want to do the same as a business.
If you’re facing cash flow problems, take a look at the due date on your bills. If you have a month or two to pay them, this buys you some time to tackle the issues at hand and get back on your feet.
Knowing who you have to pay and who can go without each month is essential for balancing your finances.
Don’t dip into your savings.
Your savings aren’t just for your own use – you’ll also need to be putting aside a relatively hefty sum for the taxman.
It’s easy to see the extra money in your account and ‘borrow’ from yourself, especially if you’re in a financial crisis. But what happens come tax season when you have to give it back? It’s simply not worth risking the future of your business by getting into trouble with the government.
The key thing to remember is that the money you see in your tax savings account is not yours.
Create buyer incentives for speedier payment.
As a small business, getting paid on time is essential – especially if you’re relying on a small number of clients to keep your business afloat.
But what happens when your clients start complaining of their own cash flow problems?
Ideally, you’ll need to create an incentive for them to pay within a reasonable time frame. After all, if you’re putting off the bills, who’s to say they’re not doing the same?
A common incentive is to offer a small discount of around 10 percent to those who pay early. It’s likely they’ll be enticed by the prospect of saving money and pay what they owe in a heartbeat.
By keeping up with your finances, you’ll be able to avoid the risks and forget cash flow issues in your small business with these easy tips.
Sourced from: businessblogshub
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