If you’re like many small business owners, the economy and recession is undoubtedly having an effect on your business. You may be losing customers, as their own revenue dwindles and they are more selective about their spending. Some may have to close their doors permanently.
A reduction in customers can create financial challenges in your own business. One way you can combat this problem is to make sure you have proper cash flow systems in place.
Ask yourself the following questions:
- When was the last time you audited your cash flow systems? Are there areas that can be improved?
You should be auditing your cash flow systems on a regular basis – quarterly at a minimum. Pay attention to what you’re doing well (and keep doing it) and then make note of things that can be improved upon and make changes immediately. Positive cash flow is critical to your business and frequent audits can help you stay in the black.
- Are you on top of invoicing?
It’s imperative that you are on top of invoicing, especially following up with payments that are past due. Create a system for invoicing and plan how often you’ll contact a customer regarding their outstanding invoice. At a certain point, perhaps 30 days past due, you need to call those customers. Email alone is not enough. Email gives them a chance to ignore your request.
- Are you giving your customers several different ways to pay?
The more options you provide, the quicker you’ll get paid. Consider offering credit card payment options. In addition, offer a discount to people who pay their invoice by a certain date. For example, if they pay within first 10 days of receiving their bill, offer them a 5% discount on their invoice. You’ll be surprised how many people will take advantage of this offer — we all love deals. And although you’ll be losing 5% of the sale, you’ll be increasing the time your invoices are paid thus improving your cash flow.
- Do you have customers who are consistently late with payments?
Review your clients annually and drop the bottom 10%. It can dramatically improve your cash flow and reshape your business for better growth. Focus on your IDEAL clients — and that includes ones who pay you on time.
If you’re paying invoices with credit cards, are you paying the balance in full each month to avoid interest charges?
Paying with credit cards can be a great way to improve your cash flow, as it allows you 30 days to pay. However, be sure you’re paying the balance in full each month. Otherwise you’re incurring interest charges and you’re paying more than you would have just paying the invoice outright.
Having a positive and steady cash flow is critical to the success of your business, even more so when the economy is tough. You MUST review your systems and procedures frequently to make sure you’re on the right track. Otherwise you run the risk of having a negative cash flow and potentially losing your business.
Would you like help in auditing or establishing cash flow systems for your business? Excelerated Success can help. Contact us today to learn how.