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Mind Your Own business
Restore Positive Cash Flow
Your business is not alone.
Many businesses struggle to keep
a positive cash flow in place.
More than likely, you can make a few simple changes
that would improve your cash flow dramatically!
Ask yourself the following 6 questions:
1. Are you asking for payment before, at time of, or after you provide the goods or services? Cash flow is very significantly impacted by the length of time that elapses between when you perform the service and when you receive payment for it. The shorter that interval, the better. So, in your business, how can you keep that time as short as possible?
- Can you require payment at the time of service? Think of a doctor’s office or a hair salon.
- How about the possibilities of a deposit, such as a retainer? Attorneys do that very successfully.
- Can you group services together in a ‘package’ that provides some benefit to the consumer for pre-payment? For example, a software service is $10 a month or $1100 annually.
2. Have you made it fast and easy to pay?
- Are you sending your invoices via email? It’s as simple as collecting an email address at time of order.
- Do you send the invoice to a specific person in the A/P department or whomever is the person responsible for paying the invoice? Again, collect this information at the time the order is placed.
- Can you set up EFT? Even better, does your business lend itself to setting up an ACH debit each month? Our payroll services do just that.
- Are you accepting credit cards online? This is not difficult to do & makes payment/collections so much easier.
3. Can you invoice earlier and/or more often?
- If you provide professional services on a ‘project/case’ basis, can you set up certain milestones at which the client expects an invoice? There is really no need to wait until the project is complete.
- If this is an ongoing service, can you invoice weekly or bi-weekly rather than monthly? Clients may well welcome the opportunity to pay in smaller chunks.
- Can you set a standard for when your invoices are sent? For example, all invoices are to be sent within 3 business days of the completion of the work. No need to wait until the beginning of the month to send all invoices.
4. Can you stagger your major expenses?
- Consider paying payroll on the 15th and 30th; all other expenses paid on the 23rd, for example.
- Is it possible to set up quarterly, bi-annual and annual expenses to correspond with higher revenue months? You know when these occur, coordinate them to your cash flow advantage.
5. Are you actually collecting on your invoices? You have performed the work or provided the product, you deserve to be paid. If you haven’t received payment within 15-30 days, you must have a pre-programmed set of next steps in place.
- Set a best practice of monitoring and reporting on your receivables weekly.
- Act quickly when someone hasn’t paid. The sooner you reach out with a reminder, the more likely you are to collect easily.
- Have a simple set of collection letters (emails) in place. You should have one for each of 30-60-90 days in arrears.
6. Does your pricing really reflect your costs? If you aren’t charging enough money, your cash flow will NEVER be positive.
- Rework the numbers. Are your expenses really what you thought they were? Is the profit margin high enough?
- If not… you know what you need to do.
You can improve your cash flow by following these simple steps!
Pick just one of these suggestions and give it a try.
We hope you found value in this installment
addressing common problems experienced by all businesses.
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