In their recent article, “12 Ways to Improve Your Cash Flow,” The Hartford Small Biz Ahead outlined 12 key strategies to successfully manage your businesses finances. Utilizing their tips can help you collect payments on time, maintain a healthy balance in your business’s bank account, and create a long-term financial plan for your business.
Collecting Client Payments
Set yourself up for success by outlining clear payment terms with all your clients upfront. The Hartford recommends invoicing customers right away rather than waiting until it is convenient, as you may delay the timeline for receiving your compensation. Utilize electronic billing to make it easy for the recipient to pay their balance immediately. This will also help you easily collect the money they send and deposit funds into your bank account quickly and efficiently.
When you send an invoice, make sure to outline due dates for payments. Rather than marking the invoice as “due on receipt,” you should outline a specific date or timeline, such as “within 30 days of project completion.” You can offer an incentive for clients who pay their invoices early, such as a small discount of 1-2%. To discourage your customers from missing their payment deadlines, institute a late fee policy that penalizes them for tardy invoice completion.
If you have an urgent cash flow issue, the Hartford recommends selling your invoices to a company that will pay 90-99% of their value up front as long as the work has already been completed. This frees you from the need to chase down payments and gives you immediate capital for your pressing needs.
Managing Your Payments
Another big part of a healthy cash flow is managing your outgoing payments. According to Small Biz Ahead, there are two important ways in which you can do this. Firstly, wait to pay your bills until they are actually due. Schedule your payments electronically ahead of time so that you know exactly when the money will be withdrawn and you are protected against any potential late fees. Slowing down your payments like this ensures that you have money on hand for your business’s expenses in the time between bills.
You can also take advantage of periodic payments. For example, if you have workers’ compensation coverage, you can pay your premium in installments with each pay period and based on your actual payroll, eliminating installment charges and the need to put a large amount of money down.
Making a Plan
Making sure you have both a short-term and long-term financial plan for your business is key in maintaining a healthy financial life for your company. Look at your cash flow often to assess whether or not you are managing your funds efficiently. If you anticipate having an irregular cash flow, you may want to look into a line of credit for your business that you can pull from when necessary. If you need assistance managing your cash flow, Affordable Bookkeeping and Payroll is here to help you stay on track. We can be reached at 310-534-5577 or firstname.lastname@example.org.