Cash flow is the lifeblood of business. A solid understanding and management of cashflow is essential to achieving business startup success.
As a business owner, you need to be aware of how money moves in your day-to-day operations. Managing cash flow means making sure the cash coming in is always greater than the cash that’s going out.
You can prevent cash flow emergencies by adopting these three characteristics.
- Accuracy and punctuality
Prompt submission of invoices increases the likelihood of a faster turnaround and promotes good habits with clients. Sending invoices out to clients in a timely manner helps encourage prompt payments.
However, prompt does not equate to careless. Mistakes or inaccurate information may cause delays, and these are unacceptable, especially if they involve payments. Perfecting invoices prior to sending them to clients helps ward off poor correspondence.
- Vigilance and persistence
Be strict when it comes to deadlines and settle anything that has gone beyond the agreed time limit ASAP. When done in a non-offensive way, clients will be open to receiving proactive reminders as this promotes long-lasting business relationships free from financial issues and disagreements. Keep communication lines open so that you may reach out and remind whenever necessary.
- A precautionary attitude
Contracts are designed to set clear expectations both parties agree on fulfilling, including the all-important payment details. You can protect yourself and your business by setting rules on late payments (e.g. interest) and possibly requiring a deposit from clients.
Deposits serve as a guarantee in case the deal is cut short or is discontinued. Apart from that, it is an excellent way to get cash up front and it serves as a credit check of sorts to determine whether the client does have the funds to pay.
In the event that you do run across some unavoidable cash flow setback, you must proceed to do damage control right away by making an assessment of your cash flow and priotising payments accordingly. With enough planning and cash flow forecasting, you should be able to avoid getting caught in a debt cycle and making poor financial decisions.
Image from move2clouds.com
