Cashflow management is key to any business. This post will give you tips on managing it.
Why is cashflow vital:
- ability to meet unexpected expenses, and more importantly- expected expenses.
- take advantage of opportunities, most of which require some cash injection.
- obtain finance more easily and at better rates with a good cashflow (since the creditor will have an incentive to provide you finance).
Failure to manage cashflow could result in having to sell assets, take loans or require investment in order to keep the business running.
- Budget and don’t overspend. Keep costs low and be frugal. Don’t prejudice your business by not spending anything- just spend purposefully.
- Invoice promptly- often if you do not invoice quickly after the job, the client forgets the effort you put in and will likely not see your invoice as a priority. Clients also could have budgeted for that cost, so if you’ve missed the boat you may have to wait.
- Make invoices payable on presentation (and allow as little time for payment as possible). In effect waiting for payment means you’re bankrolling you customer.
- Collect! If invoices aren’t paid, hound the client and if necessary send a legal letter Send Letter of Demand
- Look for good deals (you need cashflow for this).
- Negotiate early settlements, you’ll often find that because businesses need cash- they’ll negotiate on providing early settlement discounts.