Making sales and growing your business is very exciting, however, making sales is only part of the business success equation. Having worked with start-ups and small businesses for more than 15 years, and having been there myself, I know that “cashflow” is the real monster in the closet. It’s the number one reason for nail-biting, stomach ulcers and sleepless nights just to name a few.
Here are 10 ways to help you improve your cashflow:
1. Ask for all, or a portion, of payment up front: There are many products and services that you pay for on delivery or in advance, so why give your customers weeks or months to pay up? Asking for at least a deposit up front is a great way to jump-start your cashflow. We have always been 50% up front and payable upon delivery and never had anybody complain. You are not a bank. You need cashflow to operate and most of your customers get that.
2. Sign-up for a merchant account: Encourage customers to use the credit route more often. Sure, you may pay a fee, but for speedier cashflow, credit cards can’t be beat. You get your money fast and customers are used to paying with plastic.
3. Pay bills only when due: That does not mean you should be late, it only means that you don’t have to pay early. For bills due net 30 for example, why pay at day 10? Having your bills paid right before the deadline will not only keep your vendors happy, but it will improve your cashflow as your money stays with you longer.
4. Manage receivables more closely: Of course, not having overdue receivables is the best scenario and if you practice point #1, this should not happen. For those of you who have overdue receivables however, create a detailed “aging” schedule of what you are owed, by whom, and for how long and start calling. Call overdue accounts quickly, focusing first on the largest amounts due. Not fun, but often necessary to small business survival.
5. Create a cash-in / cash-out budget: Note specific due dates for payables as well as receivables. Although the balance between the two won’t always be predictable, the budget can give you a fairly accurate picture of where your business stands in the cashflow derby.
6. Revamp your invoice: A messy, unclear or inaccurate invoice is far less likely to be paid fast, let alone be paid at all. Make sure that what you send out reflects care and attention to detail – just as you would in providing your product or service. Send a little extra something with your invoice, like an appreciation note or a little something sweet, your customers will LOVE it and in return, will often respect your payment policies.
7. Offer an incentive to pay early or on time: This has proven to be a true winner for us and for some of our customers. Example: give a small, but sweet percentage discount if paid before your desired date. Most people will appreciate it and will want to take advantage of it – giving you the benefit of getting your money faster.
8. Accelerate your invoicing: If you invoice customers, do it quickly. Invoices can be prepared in advance and sent out at the earliest possible moment. More and more small businesses are sending invoices as PDF files via email as it is a way to reduce your ecological footprint and also can save days of postal delays.
9. Cut expenses: Look at what you can permanently and temporarily live without to reduce your monthly breakeven, or your “burn rate” as we like to call it. Beware of small, monthly amounts as they add-up quickly.
10. Set-up a commercial credit line: Do this when times are good…as banks like to lend money to people who have money…(I know, odd but true). A line of credit will act as an umbrella for those rainy days so you can have peace of mind in times when you need it most.
IMPORTANT: Don’t be afraid to be strict with your receivable policies. Be straightforward and upfront about it. Let your customers know what they can expect of you and most of all, what you expect of them. That’s how you will be able to not only stay alive, but thrive!
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