Small business cash flow management is key to keeping your business healthy.
Most small businesses worry about sales, but they don’t think about the cash flow policies that improve their odds of getting paid.
It’s not about selling more. It’s about getting paid, people.
- Did you know that most small businesses, especially service businesses, do not invoice the same day they complete work for a client?
- Did you know most small businesses do not have a payable policy?
- Most small businesses that do have a payable policy have no idea how to communicate that to staff, suppliers and to their customers?
Stop the madness!
If you follow these simple, no-cost small business tips, you will have a lot more cash.
That means you can manage your business without having to increase your revenues or sales.
Yup. You’ll make more money with the same effort.
Small business cash flow tip #1
Know what the payable policy is in your industry. Your local chamber of commerce can tell you. Do customers typically pay in 30days? Are they offered an early payment discount? Know what the industry standard is. That’s your benchmark.
Small business cash flow tip #2
Using your industry benchmark, ask your accountant what your payable policy should be. Perhaps it should be different with large clients, frequent clients, or long term clients.
You may want to have a different payable policy on large orders. It’s good risk management to consider this. You decide. Your accountant should help you figure this out. Write down the policy you want to follow.
Small business cash flow tip #3
Write this payable policy into your contracts. When a client signs a contract, he or she knows up front what your expectations are regarding when they need to pay you. Don’t wait until after they’ve bought and you’re chasing around for the money you are owed.
Small business cash flow tip #4
Print your payable policy on your invoices. We all need reminders. Printing your payable policy in the footer or in the body of your invoices is a gentle reminder that you take getting paid seriously. If you don’t, why would clients take it seriously?
Small business cash flow tip #5
All your support staff and sub contractors need to know what your payable policy is. Your bookkeeper should know. Your accountant should know. Any part time or full time staff member should know. That payable policy is part of your business identity. It’s how you do business. It shouldn’t be a secret.
Small business cash flow tip #6
Service businesses should invoice the client the same day they complete work for the client. Do not let the sun go down on your day without invoicing the client. Let them know in advance you’ll invoice them the same day you finish the work so there are no surprises. Do it. The clock doesn’t start until the invoice is sent.
The sooner you send the invoice, the faster you’ll get paid.
Be sure to watch our Instant CFO Course on Cash Flow Management which provides many other ways you can improve cash flow and make more money.
Cash flow is why you’re in business.
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