One of the key services we offer at Surrey Accountancy Limited is to educate our clients in understanding how essential a healthy cash flow is to a business. Often the importance of cash flow and its impact on a company’s sustainability is not properly understood small businesses.
In order to help you establish a healthy cash flow in your business we have set out 5 key ways to help all small business owners.
- Remember that you have a right to be paid
Sometimes it can be daunting to chase overdue payments from clients through fear of upsetting them or disrupting important and loyal business relationships. However, this is a dangerous method and not one deserving of the work you are doing. It is important that you recognise your worth as a business and do not shy away from chasing overdue payments. This leads us into our second tip…
- Have clear terms and procedures
The clearer and honest your contracts, payment terms and invoicing processes are, the easier it is to request payments and the less likely it is to make the overdue payment process confusing or time consuming. Your clients will also appreciate your honesty as they can develop a genuine working relationship with you based on your ability to be clear and articulate with them when needed.
- Friendships should be kept separate to business
Do not allow friendships to cloud your payment terms or overdue payment processes. If you find it personally difficult to maintain payment terms with clients who become friends, consider delegating overdue invoice chasing to your accounting team. Your accountant can act as a professional third party responsible for ensuring regular payments.
- Reflect on all policies influencing your cash flow
Whilst you should be checking the language and clarity of your terms and procedures; you should also reflect on the processes themselves.
Are you giving your clients different payment methods to encourage quicker payments?
Do you have payment plans that allow clients to pay in advance, in instalments or upon delivery?
Have you got different package options so that clients can effectively choose services and/or products that they can afford?
By reviewing the procedures of your business that impact on cash flow, you have a better chance at ensuring prompt payments and effective time management.
- Conduct cash flow forecasts
It may seem a little obvious after we have spent the last 4 points telling you ways to ensure a healthy cash flow based on how important it is for small businesses; but forecasting really is essential. It enables you to determine the sustainability of your business, get an idea of when you have money coming into your business; and when it is reasonable to consider expenses.
If you would like any more advice or guidance on your cash flow, you can contact us here.
