Staying on top of your cash flow is important for any business, but particularity for small business & especially start-ups. It’s important to establish some clear payment terms for your clients and keep track of your incomings as well as outgoings to allow your business to grow and prosper. We have some simple tips on how you can achieve that.
Take your time to decide on the payment terms, think about how and when you’d like to be rewarded for your work. You can include those terms in your invoice, service contracts or as a separate document which you share with your client before the work starts. It’s important that your customers know when the payment is due, how can they pay and if they will incur any additional charges for a late payment or if there’s an incentive for an early one. This may seem like basics to you, but it’s important to make sure you have them covered every time.
Invoices and reminders.
It’s important that you make it your habit to invoice your customer as soon as possible. Whether you usually invoice ahead of the work or upon completion, don’t delay the process and in effect – your payment. The sooner that invoice is with your client, the sooner you can expect in your account.
If you have opted for a 30 day payment period, you could offer your customers a small incentive to pay sooner – usually around 1% or 2% discount. Your businesses could have similar measures put in place for late payments or a fixed late payment fee.
Repeated late payments can affect your business quite significantly and there is no shame in asking for an update if your customer is falling behind. You could email a friendly reminder on the day the invoice is due and then follow up with a quick phone call the day after. Be open to negotiating partial payments or instalments to get things moving. After all, part of your money now is better than nothing at all.
You don’t have to wait 30 days for your payment.
Small businesses can choose the time that is best for them and one which will ensure a healthy cash flow within the company. Many small businesses opt for a 10-14 day payment turnaround, you can also negotiate it on client by client basis, just make sure you keep track of these agreements.
A lot of freelancers also opt for a part or full payment before the work commences, especially for lengthier projects requiring a substantial time commitment or financial input. This is a smart solution which will keep your bank balance in the green and your client committed. Know your bank balance.
Using a cloud based accountancy software, like one of the ones we mentioned in our previous blog, will keep you in the loop 24/7. You can use QuickBooks, Xero and FreeAgent for invoicing on the go and integrate them with your banking app to set up automated invoice reminders and stay on top of your finances.