Let’s be honest, managing cash flow for SME’s can be like a balancing tightrope act. The trick with any money fears is first and foremost, to be frank, and upfront about them, mainly with yourself. Facing the skeletons in your closet now opens up the space for the right practices to be in place to support you in executing your balancing act in the best possible way.
We take a look at three key points that can save your business from cashflow woes.
1. Cashflow forecasting
It’s essential to have an idea of what’s coming in and what’s going out. As we know, many businesses have to close shop due to insufficient cash flow. Your products and services may be excellent, but if you’re not able to stay afloat, it doesn’t matter what kind of ship you’ve got – it’s going to sink without the cashflow it needs.
Cash flow forecasting can be done weekly, monthly and most often for 12 month period. It factors in the projections of cash flow coming into the business and the expenditures. There are many software systems available for adoption, which can assist you. Otherwise, you can talk to us about setting up simple cashflow forecast spreadsheets.
Know your breakeven point and maintain some cashflow reserves; this can be the life raft in those challenging periods.
If you are pressed for time and your skills are best used elsewhere, train an employee to monitor the daily credits and debits. However, be sure to understand the process yourself, so you too are aware of what’s going on within the business.
2. Managing Cash Flow – Keep it simple
Make your invoicing process simple for customers. The easier it is, the quicker payments can be made. Ensure all your payment information such as bank details, invoice number and any online payment links are clearly visible and included on your invoice.
Give your customers payment options by accepting credit card payments instead of waiting for snail mail to deliver your signed cheque. Technology is incredible, utilise it!
Additionally, invoice the customer as soon as you finish the job. Don’t wait. Don’t forget about outstanding invoices until you’re at dire strait either. If you use PayPal or other online merchants, ensure your customer has all these details, so they don’t have to chase you, and you don’t have to chase them.
Encourage customer incentives for paying upfront or in advance to the due date. Offer your clients a small 1-2% discount. Depending on the industry you operate in, explore the option of invoicing half upfront and half upon completion. You could even look into setting up fixed rate packages.
There are many options available and if you’re unsure, which way to turn, get in touch, and we can help you.
Ensure you’re reviewing your current systems and processes within the business. Ensure you measure employee productivity and commitment.
Have an inventory of all products and services and know how well each is selling. If it’s not, it might be worth giving it the flick for now. Measure your turnover and sales.
Know which customers have outstanding invoices, the amount and follow them up if you haven’t touched base in a while.
Check your supplier costs and review these relationships to ensure you’re still getting the best possible deal. Ensure that you have been invoiced correctly and no mistakes are made on the suppliers’ end. It happens.
Just because you have a good working relationship with your supplier, doesn’t mean mistakes don’t occasionally happen. Be alert and aware, which can save you time and money should something slip under the radar.
The truth is, fear dissolves the moment you shine a light on it. If you ignore looking at your cash flow management practices – or even admit that you don’t have a clear practice set – it simply allows the fears to grow. It’s in the uncertain times that fear can take us over, but if you are aware and know where you are headed, plus have a solid grasp on all areas of your business, you can still maintain a certainty throughout the ebbs and flows.