Once you’re having business cash flow problems, finding your way out can be a struggle. Luckily, adopting the following habits will help solve your ongoing cash flow problems and keep your future finances in better shape too.
1. Catch cash flow issues at their early stages
You’ve had a great meeting with a potential client and you’ve sent your proposal. It’s in the bag, right? So what’s the harm in putting down a deposit for that new laptop you’ve been coveting? This new project will more than cover the cost…
You spot a cracking new course that will help you upskill and grow your business. It costs a smidge more than you can afford but hey, you have to invest in your business if you want to grow. You go ahead and click that ‘sign up’ button.
When running a business it’s easy to lose track of your finances. A little too much optimism about your future sales, or being a little too ready to invest without considering the timing or the potential ROI, and you can find yourself in a cash flow crisis.
2. Request a deposit before starting a project
If you’re running a service-based business, one of the best things you can do for yourself is to get into the habit of taking a deposit before starting any new project. This ensure that you’re not completely out of pocket if a client suddenly ghosts you, and your cash flow will be more evenly spread out throughout the year.
While you’re adding a 50% deposit clause to your client contract, make sure you lay out your payment terms as clearly as possible. That way everyone you work with knows exactly when you’ll be expecting your fees.
3. Track your invoices
One of the main reasons business owners find themselves short of cash is because they treat a sent invoice like money in the bank. Your job isn’t done until that invoice has been paid.
Increase your chances of prompt payment by setting a follow-up reminder for regular intervals after the invoice due date.
Most unpaid invoices are down to forgetfulness, so an email sent a week or so after the due date should be enough, but don’t be afraid to pick up the phone if you’re still waiting for payment a few weeks later.
4. Reduce overheads
If cash flow problems are causing you stress, it might be time to look at your overheads to figure out where you can save some pennies. Here are some ideas around how you can reduce overheads:
- Carefully monitor stock levels to make sure you aren’t over-ordering.
- Conduct a regular expenses audit to see where you could cut back. For example, have you done a recent comparison of energy suppliers? You could save a fortune by switching. You might find that you’re over-spending every month on membership to a service or app you never use.
- Consider whether you’re getting a decent ROI on your various expenses.
5. Automate your accounts
Automating your accounts is one of the simplest solutions to keep on top of your cash flow situation. With a financial tool like Countingup, the business account that automates accounting, you can instantly gain an accurate insight into your business finances.
The all-in-one financial tool gives you live tax estimates all year round, automates expense categorisation and provides insights into profit and loss in real-time. With the Countingup app, you can send instant professional invoices to your clients, and receive notifications you when you’ve been paid.
It means you’ll know immediately whether you can afford to enrol in a new course or buy that shiny laptop you’ve had your eye on.
Keeping on top of your cash flow can make or break your business – so don’t wait until you’re in the midst of a crisis to fix your finances. Most small business cash flow problems can be prevented by a bit of forward-planning and these four strategies are the ideal place to start.