One of the most crucial elements of any business is effective cash flow management. With tighter margins, smaller incomes, and access to lower lines of credit, it is even more critical for small businesses to monitor the equilibrium of cash in, cash out. One late payment from a large client can put the entire company’s finances into a tailspin.
If your business has struggled with managing your cash flow or you want to prevent problems before they have a chance to start, we have a few simple tips to keep your cash flow positive.
Establish Clear Terms of Payment
Make sure your customers fully understand the terms of your business agreements. Be clear and firm on due dates, how long your credit will extend, and any penalties that may arise from late- or non-payment. Find out in advance what payment method they will use to pay their invoices. Lay out a clear set of procedures in the event that they will be late with a payment, including any penalties, fees, or other consequences.
Provide Timely Invoices
Send an invoice along with every shipment to your client, or within 24 hours of completion for projects or services. Be consistent with billing, so your customers remain diligent about submitting payment promptly.
Keep Accurate Records
Whether you decide to use traditional pen-and-paper bookkeeping methods or you opt to manage your cash flow with a computer program, keep your records as clean, clear, and accurate as possible.
Maintain Clear Communication and Follow Up on Invoices
Keeping in good contact with your clients not only shows that you value their business, but also allows you to address any cash flow issues quickly and courteously. After you send their invoice, follow up with your customer to make sure they received it and that all the charges are correct. Ask if they have any questions or need any clarification and remind them of the payment due date.