The economy pretty much stinks right now, doesn’t it? But no matter what the economy is doing on any given day, your small business will not survive if you have more money flowing out of it than you do coming in.
You must have a cash flow strategy for your business if you plan on staying in business.
Here are some tactics to help you keep your bottom line in the black.
- If you bill for work after it’s been completed, don’t be an invoice laggard. Get that invoice out the door as soon as the work is completed. No need to wait thirty days to bill. Do it now and you’ll have your payment in hand sooner.
- Get a merchant account or set your business up with PayPal so you can accept credit cards. This will cost you a few bucks, but you’ll have your money in days rather than weeks. Then all you’ll have to say to your customers is, “May I put that on your credit card?”
- Consider setting up your billing on an incremental basis. There are no rules that say you must do the work and then get paid. When you negotiate a contract, set it up so you receive a portion of the payment when you begin, another portion when you are half done and the rest when the project is complete. Setting payment milestones will go a long way in keeping the cash flowing.
- Package your products or services to deliver on a regular basis and take advantage of recurring billing. You could set up a product or service of the month club or an exclusive membership that your customers can subscribe to and pay you every single month.
- Partner up with a complementary business and have them sell your products or services as a value-added benefit. The two of you can brainstorm to find where you can get the most bang for your buck and then split the proceeds.
- Stay on top of outstanding invoices. Everyone wants to save money. Offer a small discount — two to five percent — to your customers for paying within fifteen days rather than waiting the usual thirty. Monitor and act quickly on any invoices that cross the thirty day threshold with no payment.
- Study your sales patterns. What are you selling that’s selling the best right now? Use the 80 / 20 rule to focus your efforts in the high sales area to increase your client base and create more cash for your company.
Whatever approach you take, remember one thing. Cash is king (queen and ace too!) in your business. You cannot survive without cash flow. And never forget that hope is not a strategy. Hoping for better cash flow won’t help you make progress. Taking action will — especially in these trying economic times.
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About the Author: Denise O’Berry is a small business expert who provides tools, tips and advice to help small business owners be successful. O’Berry is the author of “Small Business Cash Flow: Strategies for Making Your Business a Financial Success” and Founder of the Minding Your Own Business online network. Her blog can be found at Just for Small Business.