- 08 Sep
Cashflow is the lifeblood of any business. However, when you are busy trying to build a healthy order pipeline it is easy to forget to keep an eye on cash coming into the business.
It doesn’t matter how much profit you are forecasting if you don’t have the cash in the business to pay your suppliers. All too quickly a business can turn from a healthy, growing concern to going bust as a result of poor cashflow.
There are a number of easy steps that you can take to help prevent this happening to you.
- Plan ahead
- Raise invoices at the earliest possible opportunity
- Ensure that your credit terms are clear on both your orders and your invoices
- Offer early payment incentives
- Be consistent about enforcing your late payment policy
- Don’t pay your own bills early, wait until the deadline
A cashflow forecast is the best way to keep an eye on things. If done properly it will keep you well informed of cash coming into and going out of the business for the next 12 months. This bird’s eye view will allow you to know when there may be a dip in cashflow and therefore make contingency plans.
Make sure that the forecast is realistic though and allows for the unexpected such as price hikes from your suppliers or a major customer letting you down on a payment.
Once you have completed the plan ensure that you refer to it on a regular basis and keep it updated so that you can keep your business healthy.
In recent years it has become acceptable, if not the norm, to ask for either full or part payment in advance. Naturally this makes for fabulous cashflow planning and minimises the risk of customers either paying late or even worse not paying at all.
If you feel unable to ask for full payment upfront then ask for part payment. For larger and longer tasks ensure that you include regular, scheduled payments in your quote so that your customers are clear that they will need to make payments throughout the duration of the project.
Finally, make it as easy as possible for your customers to pay you. This may sound obvious but you will be surprised at the difference it will make to your cashflow if your customers can pay you immediately using online payments.
Whilst there is a charge for using these services, in this day and age customers expect businesses to provide this facility. Money is normally received into the business 5 – 10 days following the transaction, so not only will you be providing good customer service, you will also be improving your cashflow.
Help is at Hand
If you require any help with cashflow planning or would just like to discuss how to make your business more cash efficient then please feel free to call us to and see how we can help.