Get paid what you're owed
Accounting software can help you to track accounts receivable.
7 practical tips for managing accounts receivable (and mastering your cashflow)
1. Keep a cash flow forecast: First, set targets for the next 6 to 12 months to track your finances and avoid shortfalls. Then, note seasonal variations like heating bills increasing during the winter. Don’t forget to factor in fixed and variable costs and be realistic about your forecasts.
2. Stay on top of payments: Send out invoices to customers and clients promptly, and chase overdue bills. Be clear about your payment terms—30 days is standard. Get to know your customer payment dates and don’t ignore delays because a customer who hasn’t paid up might be about to go out of business.
3. Control your stock: If you know what’s in stock and what you need to reorder, you’ll avoid tying up your cash in too much stock. To achieve this, reconcile your stock records at the same time as your bank account—be it weekly or monthly.
4. Stay friendly with lenders: Whether your small business is new or expanding, you may need the occasional cash boost from a bank or lender in the form of an overdraft, credit agreement, or revised payments terms. If you keep your bank and lenders updated about unforeseen outgoings or changes in forecasts, they’ll be more likely to treat a request favorably.
5. Access credit: If your business is growing rapidly, seek access to a line of credit from a bank or financier, such as an overdraft or short-term loan. In many cases, banks are willing to lend to a business if they can see a draft service contract or letter of intent. Once the client pays, you can pay your debt.
6. Tighten up your outgoings: Get in the habit of reviewing your utilities, subscriptions, and general expenses once a quarter. It’s quite common for a business to outgrow a service or tool only to continue paying for it without good reason. Similarly, smaller expenses can add up over time if left unchecked.
7. Anticipate problems before they happen: Business Intelligence helps you identify potential cash flow problems in advance by updating your cash flow forecasts and monitoring market conditions. You should also consider if your customers or suppliers are in financial trouble and take action if needed. If you’re worried, talk to your accountant, investor or business mentor before a small problem becomes an urgent one.
Protecting your cash flow gives you better buying and negotiating power, which could save you money long term. If you know about a shortfall in advance, you can also extend credit if needed.