1) Make a plan – and act on it
No matter how small your business is, it’s crucial to know when you can expect money to come in and go out. That way you can prepare in advance for any time when you might not have much coming in, perhaps by cutting costs during that time.
Planning your cashflow doesn’t have to be complicated. There are many tools available to help you draw up simply cashflow forecasts.
2) Consider upfront payment
Could you invoice your customers for either all or some of your work upfront? Perhaps you could take a deposit? This lessens the risk of your having completed the work and yet not being paid.
Upfront payment can help your customers as well, as it means they know exactly what they can expect to pay and when.
3) Invoice promptly
Whether you invoice before or after you do the work, or some upfront and some on completion, it’s crucial to invoice your customer promptly. A sale is not final until the money comes in, and customers can’t pay you if they don’t have an invoice to pay.
Set aside time each week, or at the very least each month, to issue all your invoices.
4) Collect the cash
Don’t let customers keep you waiting for payment. Remember, it’s you, not they, who set your payment terms. Make yours clear on your website and on your invoices, and keep to them.
Use automatic credit control tools to chase any customers who haven’t paid.
5) Consider when to pay your bills
Cash flows out of a business as well as in. When your suppliers invoice you, you should keep to their payment terms, otherwise your relationship with them could be damaged.
If you pay them before the bill is due, then your suppliers will be very happy indeed – but you could risk running out of cash for another bill, or a tax payment.
Make sure that you know what taxes you can expect to pay and when.
Emily Coltman ACA is Chief Accountant to FreeAgent, who provide an award-winning online accounting system designed to meet the needs of small businesses and freelancers. Try it for free at www.freeagent.com
