One of the most empowering aspects of running a small business is that fact that you call the shots. As the decision maker you have the power to craft your own path and execute ideas however you see fit. Yet, somehow, when it comes to cash flow issues, entrepreneurs find themselves helplessly throwing their hands up in the air, as if to say the issue is completely out of control.
Honest entrepreneurs will come to terms with the fact that their business’ cash flow is 100% their responsibility. The good news is that with a few tweaks to your routine, cash flow can become yet another empowering aspect of running your own business.
Chances are you got into business because you saw an available space in a market, applied your talent and dove in; this does not necessarily mean you have a business/financial mindset 24/7, but you should and more importantly, you can.
The day you complete a project, commit to sending an invoice attached to the finished work. Also, consider a contract tweak as simple as requiring clients to pay a percentage upfront for a service you provide. Just like you keep track of your work progress, keep track of incoming and pending invoices. Work in a routine time each week to go over the status of your accounts receivable; with a little effort you can commit to staying on top of things.
Reward, Punish, Pay
If you want more clients to pay up on time, offer them an incentive. For example, highlight a box on each invoice that exemplifies a discount for invoices received before X date. Consequently, you should initiate late fees for those who pay after the due date. Chances are your clients are in the business of making money just like you, so don’t be afraid to set some reasonable incentives and consequences that will motivate them to pay up.
Also, be honest. If you’re reading this article with a glazed over look stop lying to yourself. If you don’t have it in you to be a financial wizard that’s OK, but be prepared to pay up. Bookkeepers and accountants cost money. The plus side is they will take over your lackluster efforts and invest the gusto that is needed to stay on top of things.
Buy Yourself Some Time (and Money)
Most suppliers require you to pay up within a 60-90 day period. Utilize this window and make payouts that work best with your business’ cash flow. Also, take advantage of the relationships you have with your suppliers. If you are a consistent customer then suppliers may be able to work with you. For example, you may be able to commit to sending them a check on a standing date of each month (a date that just happens to work best for your business).
You can also enhance your working capital by considering alternate funding options like a merchant cash advance. Short term funding like this can get your business a lump sum of cash to purchase equipment, inventory or marketing campaigns. An option like this can help your business get a step ahead without disrupting your precious cash flow.
What other ways can you refresh your business’s cash flow?
This article was originally published on Funding Gates. Funding Gates is the world’s first
About the Author: Kelly Gregorio writes about topics that affect small businesses and entrepreneurs while working at Advantage Capital Funds, a merchant cash advance provider. You can read her daily business blog here.