Cash-crunch is one of the common problems that keep many business owners awake at night. There are a few simple ways with little cost that can speed up your cash flow.
Keep track of receivables. It is easy to lose track and then neglect to follow up on an overdue account. If you are too busy to do it yourself, hire a bookkeeper to do it for you.
Invoice as early as possible. If you make invoices once a month, for example, at the end of the month, those customers who purchase in the early of month will have up to 30 additional days to hold your money in their bank accounts. You may consider changing the billing cycle to once a week or even generate an invoice as soon as goods or services are delivered.
Make your invoices as clear and as error-free as possible. Confusions or mistakes cause delay in receiving your payments.
Shorten your payment terms. Most of your customers schedule your payment based on the terms printed on your invoice. If you give 30-day terms, typically, you don’t expect payment before then. You will probably receive your payments earlier by simply changing your “net 30” to “due on receipt”.
Follow up promptly. Start calling customers when their invoices are outstanding close to 30 days to make sure they receive your invoices and clarify any issues if there are. Experience shows that the longer you remain out of contact with a customer, the less likely you are to recover the full amount owed.
Ask for a deposit or partial payment. This technique is especially good for those big orders. You can also consider progressive billing for work where you have to incur significant expenses before being able to deliver the final product.
Cash is king. It is the blood of the business. Without a smooth cash flow, your business will never be healthy.
