Entrepreneurs’ Guide to Better Cash Flow
“I will gladly pay you Tuesday for a hamburger today”
-Wimpy, character from the cartoon Popeye
Cash flow is the lifeblood to any business, but it is of particular importance to an entrepreneur or sole practitioner.
Sales are certainly important, but if you do not have the money stream to fund your operation, all the sales in the world are not going to help you.
If your customers pay you cash up front, great! However, you may feel that you must give customers credit in order to remain competitive. This can work well, but you have to give credit in a way that protects your business.
Here are some ways to improve cash flow in your small business:
Have a smart plan for granting credit to customers. You might grant credit only to long term customers, while requiring new customers to pay cash. You may extend payments only a few weeks, or many months. The right plan is what works best for you.
Bill promptly and make certain to include your payment terms on your invoice. Include a payment envelope with your bills. (The credit card companies do it for a reason!)
Give a discount for early payment.
Make it easy for people to pay you. Accept credit/debit cards or use online payment portals.
Always get a down payment. It should be the “price” of being able to pay the balance in installments.
If you offer a payment plan, make all plans subject to regular and automatic credit debit payments. It is easier and more efficient.
Document all payment plans in writing. Make certain that customers sign their agreement. Include a provision that voids the payment plan if payments are not made as promised. Many businesses suffer a real cash flow problem due to broken payment plans.
Review your receivables every month and have a plan to recover your money. Do not wait more than 90 days before asking for outside help from an attorney or collection agency.
Marilyn “Mara” Miller is an entrepreneur and an advocate for small businesses.
In the end, it all comes down to how well you manage the process of being paid. Your cash flow is really under your control. So take control, and watch your business grow!
Marilyn “Mara” Miller is committed to small businesses. For over a decade, she has been a strong advocate for her clients. She not only helps customers recover money due to them, but also works to strengthen their credit practices and procedures.
Marilyn is founder of M3 Consultants, which helps small business owners improve their cash flow through better credit practices.