Cash flow is one of the critical elements in any business, but especially in a small business environment.  One of the key factors to generating income is invoicing.  I know that sounds obvious, but careful management of your invoicing system can be one of the most important basics to running your business.

Invoices

As a deal is closed, whether it is for a single item or a large project, reiterate the billing schedule.  It can be a fixed date, upon delivery of goods, at milestones, or project completion.  As your bookkeeper or biller sets up the account, recap it for him or her.  It may seem like overkill but this is important stuff. 

Set up a personalized invoice.  Customize it if necessary for a repeat customer.  There are lots of templates available and most automated systems offer you some choices. 

Pay attention.  Don’t let invoices go unpaid.  There are a number of ways to follow up on late payments.

  • Automation – It is a time saver.  It can be phrases as a friendly reminder that an invoice was overlooked.  There are also tactful ways to reiterate the statement when the deal was closed about when the payments would be due.

  • Early Payment – It might be in your best interest to offer a slight discount if the bill is paid significantly early.  You will have better cash flow and the customer will be motivated to pay early.

  • Telephone – The human touch is also a viable alternative.  Unless the payments are way out of hand, just a simple phone call is usually a motivator.  It should be friendly but firm.

Purchasing

Cash flow deals with money exiting your coffers as well as entering.  Be cautious with automated refills.  Be sure you need that much inventory whether office supplies or products for your business.  Check your payment schedule.  Unless the vendor is offering a discount for early payment, delay until you need to release the money.  

Try to pay before interest starts to accumulate.  If you get really behind, talk with your suppliers about payment flexibility.  Check out zero interest business credit cards. 

Sales Volume

Don’t confuse wishful thinking with a realistic estimate of your future sales.  Forecasting is difficult in many circumstances, but for a new business it is extremely hard.  You have little or no historical data to rely on.  You may be able to draw on information from related businesses.  Just be conservative with your projections.  This should help with overspending and then being caught in the squeeze.

Cash Flow Budget 

Don’t forget Accounting 101.  A cash-flow budget is a detail of all the cash in and out during a given time frame.  It allows the owner or manager to see the status on an ongoing basis.  It can help you plan for tight periods or off-season flux. 

In the vast majority of start-ups cash flow is a scary balancing act.  You are encouraged to keep at least two months of cash reserves to help with operating expenses, but that is not always possible.  While it is certainly a challenge, with some concentrated effort, you can win.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team