When asked about the business reasons for closing down their companies, 65 percent of the owners pointed to financial problems, including cash flow management, as the culprit.
Experienced small business owners know they can take several steps to keep their finances on track. Here are six helpful strategies:
1/Automate your invoices
The faster you invoice, the faster you get paid. Keep your payment terms as short as possible and pay your bills, as far out as you can, without breaching terms and integrity. Automate admin as much as you can. Let technology take jobs off your plate, so you can focus on sales generation and management.
2/Know your numbers
Crunch the numbers and budget often. If a customer with deep pockets wants to pay you every three months but your suppliers demand payment every 30 days, you need to be sure your business is ready. Budget forward 3-6 months and update the numbers when you know more.
3/ Accounting and Bookkeeping Automation
Some of the most successful small business owners I know, rarely let a day go by without checking their accounts. And, in the age of the iPhone, it couldn’t be easier to keep close tabs on your finances. Digital banking options and accounting software mean you can drill down to analyze and project cash flow in real time.
4/Make it easy for your customers to pay you.
Once you bill a client, make it as easy as possible for them to pay you. With a single click, consumers can now purchase groceries, movies and cab rides. Figure out how you could lower the barrier to payment for your customers, whether it’s through subscriptions, bundled products or a streamlined user experience.
5/Analyze your pipeline to identify your power customers
As you grow your customer base, learn what your best customers look like and where they come from. The key characteristics – from demographics, to behavior, to interests – will depend on your sector.
Recurring customers can often be the glue that keeps a company’s cash flow consistent.
6/Have an emergency plan
It’s always hard for growing small businesses to save money. So if you can’t build a cash reserve, find one, to identify the people or institutions you might be able to turn to in leaner times.
Do the homework when your company’s not on thin ice. Waiting until tough times can be too late. Covid has taught us that we can all have tough times.