Staying in the black – must know cashflow tips
We have a saying here at Proactive Revenue is vanity, profit is sanity, and cash is king.
Cash is like the oxygen of a business; without it, it will fail. You’re not taught in school or before we start out in business how to manage cash, but it’s the most important thing to keep an eye on.
Even profitable companies can experience cash flow problems as they haven’t allowed for debts to be due before they’ve collected enough money from sales to cover those bills.
To gain control of your cash flow, you need to be strategic and not leave your cash flow to chance. It is time to be proactive in your approach (pun intended) so here are some tips to get you started.
- Change Invoicing payment terms – Make them shorter. Typically, companies have a 30 or 60-day payment period. But by making this shorter you easily improve your cash flow.
- Deposits and part payments – Ask for deposits on large projects, especially if you need to purchase materials or products on behalf of the client. This allows you to pay for these purchases and minimise cash flow issues if the client is slow to pay.
- Credit cards – Most credit cards have an interest-free period from purchase so take advantage of these interest-free periods. Leaving money in your account and paying closer to the 90 means you benefit from that cash, rather than your bank.
- Payment extensions – Ask your suppliers for better terms or payment extensions on your invoices owing. You have more buying power if you spend a significant amount of money with them, so asking for this is in their best interest to keep you as a customer.
- Learn how to accurately forecast your cash – Having an understanding of what cash is due to be paid and what payments you can need to make in advance will help you understand if you have potential cash flow issues in the near future. Being prepared for this means you can plan ahead to avoid this.
- Plan, plan, plan. You’ve probably heard the saying: failing to plan is planning to fail. The driving factor to why people get into cash flow strife is not having an easy-to-follow plan for how to manage cash. What usually happens when you’re unsure of something: nothing. People tend to get caught up in not knowing how much to set aside so they don’t set aside at all. Taking any action in this regard is better than taking no action at all. The first step is always the hardest.
Cash flow is a vital part of being able to run your business effectively. If you need help to put a more effective plan in place, reach out and we can facilitate that for you.
