As a small business owner, you will need to get into a routine to manage your cash flow. This will ensure that you have enough money to pay for expenses especially in your first year of trading. Here are a few tips on how to successfully manage a positive cash flow.
Tip 1 – Keep a cash flow forecast
You will need to routinely check that you have enough money to cover your expenses which can be challenging for a new business owner. A cash flow forecast is a successful way to predict what money is coming in and going out. If you update this forecast weekly than you will have a reasonably accurate position of your cash flow ensuring that you are never in the red.
Tip 2 – Maintain reliable customers
Your reliable customers, whether they are big or small customers, will ensure that you receive your money on time. This will have a positive impact on your cash flow and you will be able to cover your expenses on time as well. This in turn will help you keep a positive cash flow position which is the lifeline of your new business.
Tip 3 – Keep strict payment terms
Right from the start of any business relationship with your customers, you should lay down your payment terms. This will ensure that they are aware of the date that they will have to pay for work completed. By keeping strict payment terms of 30 days is the best way to manage your cash flow. This is advisable as you will probably have expenses of your own due in 30 days as well.
Tip 4 – Invoice quickly
A small business owner might find it difficult to get into the routine of invoicing as soon as work is completed especially with all the other jobs that need completing. However, the sooner you invoice the sooner you will be paid so stick to the rule as much as possible. Invoices should also be sent via email providing you with written proof and a date and time as well.
Tip 5 – Provide alternative payment options
Customers may find it easier to use alternative payment options such as PayPal or direct debit. Make it easy for them and facilitate their choice of payment option whenever possible.
Tip 6 – Use Cloud based Accounting Software
Cloud based accounting software permits you to access cash flow reports, customer accounts and your bank account on any device from any location 24/7. You will be able to keep on top of payments and invoicing customers on the go as well as from home.
Tip 7 – Monitor cash flow
If you are not able to monitor your cash flow daily than you should assign a dedicated employee to perform this function instead. If you keep a threshold on your cash flow of £300 than you will be able to make contingency plans to cover your expenses on time if you run in to problems.
Tip 8 – Good association with your bank
As a small business owner, you may be given valuable tools by your bank such as credit cards and overdrafts. If you advise your bank of your predicted cash flow requirements they may provide you will alternative solutions. It is advisable to contact them if you have any problems with paying expenses so they can advise you as to a solution.