The energy crisis lays a challenging road ahead for Canadian small businesses. Even with government support, the wholesale price rises of oil and gas will put pressure on most industries.
As well as an obvious spike in costs, businesses also face a potential drop in sales as customers tighten their spending. This means profit margins will be pinched at both ends, so taking actions to protect cash flow will be more vital than ever.
This article explains what you can do as a small business owner to influence the speed of money coming in.
- Why cash flow is critical now
- How to improve cash flow by getting paid faster
- 5 software features that make paying you easier
- Final thoughts
Why cash flow is critical now
Close monitoring of cash flow is always important when it comes to keeping your small business financially healthy. But at times of hardship, it becomes absolutely critical.
With a steady cash flow, you become more adaptable, improving your ability to respond to unexpected market changes, shifting consumer habits, and nervousness from employees.
It’ll also give you more wiggle room to make any purchases that are essential to the survival or continued success of your business. This could be things like replacing old equipment with more energy-efficient models or installing insulation and double glazing to preserve heat in your buildings.
Such investments are only possible with solid cash flow, and the energy crisis will bring new pressures that are outside of your control.
Even if you negotiate a (relatively) good contract with your energy supplier, the costs end of your cash flow will still rise. Whether it’s increased prices from other suppliers you use, or how expensive it becomes to transport your products, you’ll see more money than usual coming out of your business for a while.
Of course, you’ll need to do what you can to minimize this, but there are huge opportunities to improve cash flow at the other end. And that’s by evolving how you’re being paid by customers.
How to improve cash flow by getting paid faster
Late payments are a big contributor to cash flow problems. They can also be frustrating because you’ve already delivered the service, and are counting on that money to come in. Delays are particularly tough if you’re a small business that is in competition with big corporates, who don’t face the same month-by-month financial pressure.
In other words, speed matters. You need customers to pay sooner rather than later. You can influence how reliably and quickly you get paid by removing as much friction as possible from the process.
Don’t forget that your customers are facing the energy crisis too and may have financial issues of their own. Even those that have previously paid you on time may start dragging their heels.
The actual act of settling an invoice can bring feelings of resistance when money is tight, especially if you’ve had to increase your prices.
By evolving your customer’s payment experience, you start to alleviate this resistance, and are likely to become a supplier that they pay quickly.
So, how do you do this exactly?
It all starts with technology.
5 software features that make paying you easier
Some of today’s accounting software options provide features that make it easier for you to get paid. With the right combination, you can better meet the needs and preferences of your customers, enticing them to get payment out of the way earlier.
When looking at which solution to use, keep an eye out for these five features that make paying easier and keep cash flowing into your business.
- Invoice personalization
When customers are presented with an old, generic spreadsheet invoice, it makes them seem like just another customer that you’re trying to get money from.
Software that allows you to personalize invoices quickly and easily with custom line items, headings, colours, logos, and accreditations make the document appear more considered, clean, and professional.
Another capability to look out for is being able save personalized invoices. This way, once you’ve found a format or style that has resulted in a customer paying quickly, you can re-use it for future billing.
2. Maximum payment methods
If possible, you should meet your customer’s expectations on their preferred method of payment. This reduces the likelihood that they’ll delay payment because of a need to shift from their usual processes. It also anticipates potential objections around the way you’re asking them to pay.
Look for software that allows customers to pay in as many ways as possible, including online, in person, and by phone. You’ll need software that integrates with a payment processor to be able to accept payments by card.
Some solutions offer additional functionalities, such as the ability to pay directly from an invoice, using a convenient ‘Pay now’ button.
3. Payment tracking
To get the full picture of your revenue, you need to know exactly what you’re owed, who has been invoiced, who has read their invoice, and who has already paid.
Software with payment tracking features delivers these insights across the whole business, which helps you identify and focus on late payers.
When you know who is behind, you can adjust how you communicate with them. You might decide to send more frequent reminders or stop emailing and give them a call instead. This attentiveness can sometimes be all it takes to nudge the customer into paying.
4. Estimate to invoice conversion
Errors within your invoices not only disrupt the customer experience, but also add days—if not weeks—to you getting paid.
Sometimes, your client may be looking for any excuse not to pay, and a simple billing mistake might be all they need to push it into next month.
Smart capabilities that maximize accuracy at invoice creation are great for combatting this. For example, some solutions allow you to convert approved quotes and estimates into invoices. Not only does this save you significant time, but it also gets the ball rolling much sooner, and with less chance of errors.
5. Mobile functionality
Having invoicing software at your fingertips at any given moment can help you nudge customers into paying at key opportunities.
For example, if you’re visiting a client in person and talking about payment, they may offer to pay as soon as you send the invoice. With mobile functionality, you can do this right then and there, rather than waiting for when you’re back at your desk.
You can even chat it through as you’re putting the invoice together, meaning they’ll spend less time having to go over it before paying.
Protecting cash flow as much as possible will be key to staying flexible during the energy crisis.
Though there will be pressures out of your control in terms of rising costs, you can still influence the consistency of your income with the right tools.
The more friction you get rid of for your customers, the more quickly and reliably they will settle invoices. Less wait time means less pressure on your cash flow, so you’ll have the financial agility to respond to whatever comes next.