What is cashflow management?
In its simplest form, cashflow management is doing everything possible to ensure that money flows into your business as quickly as possible, and leaves the business as slowly as possible.
When you’re a busy, hard-working small business owner, getting paid on time is vital for success. But, invariably, not everyone can or will pay up when they should.
Challenges around cashflow, billing and invoicing certainly aren’t unique to the small business community. Profitable businesses are just as likely to close their doors for cashflow reasons as unprofitable ones. The irony, of course, is that no matter how well-respected, innovative or essential your firm and its output is, if you’re not in control of the books, your business may end up simply treading water.
Here are a few top tips on getting paid on time, invoicing efficiently and having more cashflow:
Tip #1: Discuss payment terms before you get started
Getting this sorted upfront means that there is no confusion down the track. It also sets the client’s expectations around payment before you start the work.
Tip #2: Keep detailed records of inventory and time
This saves time when it comes to creating the invoice and makes sure you don’t miss anything. It also means if things are going over budget you can let your client know.
Tip #3: Make the invoice clear and easy to understand
List the details of the job in a way that makes sense to the client; any confusion could create a payment lag. It’s also good to personalise your invoice with your business logo and your bank details so you can be paid.
Tip #4: Use online invoicing & implement payment services
Xero offers an online invoicing feature that encourages collaboration with your clients, changes made to invoices are instantly updated, giving you information around whether the invoice has been received, as well as viewed. This, coupled with a payment service, can really help get that payment in quicker. Up to 2 weeks quicker in fact!
Tip #5: Keep on track with debtors
The squeaky wheel gets the oil. When things become overdue, send reminders, monthly statements or make a phone call. It promotes that you are serious about getting the invoice paid. Having a process that helps streamline invoicing can reduce the amount of time you spend collecting your hard-earned money.