During your first year of trading you will need to get onto a routine of managing your small businesses cash flow. This ensure that you have enough funds to cover your initial expenses.
Below are some tips on how to successfully manage your businesses cash flow.
1. Forecast your Cashflow
By routinely checking that you have enough funds to cover your expenses might be challenging for a new business owner. However, a cash flow forecast is a successful way to predict what money is expected to be received and what money is required to pay for your expenses. By updating this forecast weekly you will have a relatively accurate position of your cash flow ensuring that you are never in the red.
2. Have 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.
3. Maintain 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.
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.
Provide various 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.
Use Online Accounting Software
By using online accounting software such as FreeAgent you will make it much easier to manage your cash flow and capture your daily expenses.