You've had a really great meeting with a new potential client, and you've sent your proposal. It's in the bag, right? So what's the harm in putting down a deposit for that new laptop you've been coveting? This new project will more than cover the cost.
Later, you're scrolling through your social media feed and spot an ad for a cracking new course that'll help you upskill. It costs a smidge more than you can afford, but hey, you have to invest in your business if you want to grow. You go ahead and click that 'sign up' button…
When running a business, it's all too easy to lose track of your finances. A little too much optimism about your future sales, or being a little too ready to invest without considering the timing or the potential ROI, and you can find yourself in a cash flow crisis.
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And once you're having problems with your cash flow, crawling your way out can be a struggle. Luckily, adopting the following habits will not only help you out of a current cash flow crisis but help keep your future finances on a much more even keel.
1. Keep on top of your invoices
If you're running a service-based business, one of the best things you can do is to get into the habit of taking a deposit before starting any new project. Not only does this ensure that you're not completely out of pocket if a client suddenly ghosts you, but it means that your cash flow is more evenly spread out throughout the year.
While you're adding that 50% deposit clause to your client contract, make sure you lay out your payment terms as clearly as possible too. That way everyone you work with knows exactly when you'll be expecting your fees.
And don't think you can sit back and relax just because you've sent out your invoice. One of the main reasons business owners find themselves short of cash is because they treat a sent invoice like money in the bank. Tough love time: it isn't! Your job isn't done until that invoice has been paid.
Increase your chances of prompt payment by setting a follow-up reminder for regular intervals after the invoice due date. Most unpaid invoices are down to forgetfulness, so an email sent a week or so after the due date should be enough to jog your customer's memory.
All the same, don't be afraid to pick up the phone if you're still waiting for payment a few weeks later.
2. Cut your outgoings
If cash flow issues are causing you stress, it might be time to look at your overheads to figure out where you can save some pennies:
- Carefully monitor stock levels, to make sure you aren't over-ordering.
- Conduct a regular expenses audit to see where you could cut back. For example, have you done a recent comparison of energy suppliers? You could save a fortune by switching.
- Are you spending money wisely? Consider whether you're getting a decent ROI on your expenditure. You might find that you're over-spending every month on membership to a networking group whose events clash with other commitments, or paying for an app you never use.
3. Automate your accounting
You can't avoid a problem if you can't see it coming. Automating your accounts is one of the simplest ways to keep on top of your cash flow situation.
With an automated cloud accounting solution, such as Countingup, you can see at a glance what's happening with your business finances. You'll know exactly what's going out and what's coming in, and you'll have a real-time idea of exactly how much tax you'll owe HMRC, making it easier to plan your spending.
No more guesswork - you'll know immediately whether you can afford to sign up for that new course or buy that shiny new laptop you've had your eye on. What's more, dealing with invoices and tracking your expenses is also super easy in an automated system.
Keeping on top of your cash flow really can make or break your business - so don't wait until you're in the midst of a crisis to fix your finances. Most cash flow issues can be prevented by a bit of forward planning, and these three strategies are the ideal place to start.
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