Cash flow problems are terrifying for business owners. You can often see it coming, and it slowly approaches like a tsunami. All you can do is sit and wait for the worst of it to hit you. Your cash pot is decimated, leaving you with no access to funds. It’s terrifying because you know your business is working and profitable. But, your money is tied up in unpaid invoices, assets, and other areas.
Here’s the good news. You can do something about it. You don’t have to sit and watch the cash flow problems devour your company. Because if you don’t act fast, they will. When you cash flow runs dry, it means you start to struggle. You can’t pay your invoices on time. The overheads begin to stack up. Late charges and interest gather. You get deeper into debt. When this starts happening, the safety raft is drifting further away. So, today, we’ll show you how to circumnavigate your cash flow problems. We’ll get you back into a liquid state, with plenty of money in the bank. Let’s jump straight in.
Rule number one: embrace the problem as early as possible. As we said before, you can usually see it coming. You watch the current account slowly get smaller. All the while, those invoices are coming in thick and fast. It’s so easy to ignore the problem and hope things improve. Trust us, they won’t. Now is the time to be proactive. Take critical steps to handle the situation, and make that money come through. Otherwise, it’s just going to get worse.
Send invoices immediately
As soon as you finish a job or project, invoice immediately. Send the invoice along with your final submission. Don’t leave it until a week or month later. This is pure psychology. Invoice immediately, and the project is still fresh in your client’s mind. Paying that bill becomes the first thing on their list. Invoice two weeks later, however, and they’ve already moved on. They’re in the middle of another project, and it will go on their ‘to-do’ pile. Because you’ve taken a slow approach to invoicing, they’ll also take a slow approach to paying.
Early payment discounts and late payment penalties
If you want to guarantee that clients get their payments in quickly, try using a discount scheme. We find that it works very well. You know that your best clients always pay on time anyway. If you’re able to offer them a discount, they’ll appreciate the gesture. It will boost loyalty, and guarantee future income. Late payment penalties, on the other hand, also have their bonuses. First of all, it will encourage lazy clients to pay faster. Secondly, it will weed out the truly useless clients.
Explore invoice financing
Invoice financing is a type of loan granted against your outstanding invoice payments. Let’s say you’ve completed a job for a client, but they’ve yet to pay the invoice. Let’s say there are four or five similar outstanding bills that you are waiting for. This could add up to thousands, causing your cash flow a serious headache. Invoice financing will unlock those funds by granting you a loan at the outstanding amount. As the invoices slowly do come in, you simply pay it back. Click the following link to find out more about invoice financing.
Sell your assets
Every business has a variety of assets. Many become dispensable over the years. Take a look at your assets, and ask if you could sell any on. It’s an easy way to quickly unlock money from your business. Most of us have lots of money tied up in assets like machinery, equipment, and stock. But you can’t pay the bills with a forklift truck. Instead, sell it, and get the cash back.
Raise your prices
Many business owners are scared to raise their prices, especially when their finances are in dire straights. When you desperately need money, the prospect of pricing customers and clients out is terrifying. But, it’s the brave thing to do, and more often than not, it works. Raising prices is a natural part of business. If you’ve developed loyal customers and clients, they’ll respect it, and pay the extra. Statistics show that customers often gravitate towards higher prices because it represents quality. So, you might actually give your company the boost it needs.
Finally, make sure you hire a good bookkeeper. They’ll be the first to point out the problems, and they’re best-placed to offer solutions. They can move money around, and make the numbers work. Don’t hide away from cash-flow problems. Tackle them head on.