Running a business is all about cash. The basic aim is that you get more in than you pay out! Sadly, when you start out in a new business the opposite may be true. Here are 10 top tips for getting your cash flowing in the right direction.
1. Know the terminology
You must know the basics of bookkeeping. You send out invoices to clients, this gives details of what and how they should pay. The money that they pay to you is called ‘income’ or ‘incomings’ and the money that you pay out is called ‘expenditure’ or ‘outgoings’.
2. Keep your expenditure down
It is a common mistake to focus on how much money you have coming in and fail to take any notice of what is going out. Successful businesses take steps to cut down on their expenditure and that increases profits.
3. Do some math
The best way to keep track of your business finances is to maintain a spreadsheet. This must be kept up to date and must be accurate. You can use it to do some simple calculations on a weekly or monthly basis.
4. Keep a cash reserve
Inevitably there will be some months where you have some unexpected expenditure or a sudden dip in income. Build some slack into the system by having some cash in reserve to see you through the hard times.
5. Get the money in quickly
It is a big mistake to give your customers a lot of credit when you are starting out. Insist on upfront payments if at all possible or keep your terms (payment period) as short as possible. A 30-day term is fair and reasonable.
6. Get creative on sales
If your sales have nose-dived create a killer special offer to get them up and running again. Let it run for a fixed period only so that it focuses your customer’s minds and makes them act straight away.
7. Embrace technology
Use all the apps and software that you can get hold of. It will free up a lot of your time and give you instant access to your business information. Try to store all information digitally if you can. It will stop you having to hunt around through piles of papers.
8. Put someone in charge
If you have a partner or an employee that you could put in charge of cash flow this will ensure that one person is always keeping an eye on it. You could decide on a threshold that would trigger a meeting to discuss what is going wrong!
9. Get some good credit
Try to work a good credit deal with your suppliers. If you can wait for 90 days to pay for goods that you sold on in a week then your cash flow is going to be very healthy. Also, try to negotiate discounts for bulk buying and regular orders.
10. Don’t panic
In the early days, breaking even is a success! Getting into profit will come later.