If you’re planning for greater success – and aren’t we all – or forecasting for increased cash flow, then getting on top of your finances is one of your first important steps. Here are our seven tips for getting, and staying, on top of your finances this year.
#1. Establish a smooth invoicing system
By following these simple invoicing rules your chances of getting paid on time – and when you need it – are much more likely.
- Send invoices as soon as you deliver a product or complete a service
- Format your invoices so they’re easy to read with amount due, payment date and payment methods
- Confirm the name and contact details of the payer and send the invoice directly to them (copying in other relevant parties)
#2. Follow up on late invoices
Payers sometimes need a gentle reminder when their invoice goes past the due date (and, let’s be honest, a less-gentle reminder when it goes well past the due date). Use your accounting or invoicing software to set up automatic reminders when invoices are due or late. This will help you mitigate cash flow problems should the customer have trouble paying your bill.
#3. Research your customers and clients
If you’re planning for sizeable amounts of revenue from particular customers and clients, then you need to make sure they’re good for it. Conduct thorough background or credit checks and research online for any negative feedback. Should the results be less than reassuring, you can still engage in business but protect yourself by asking for full or partial payment in advance.
#4. Sign a contract
A contract can help ensure there are no misunderstandings between you and your customers or clients and protect your business against any unexpected reasons they may choose not to pay. Your contract should clearly state your payment terms, each party’s deliverables and responsibilities and what will happen should an order be cancelled, work not be up to par, or other problems that may arise.
#5. Streamline your finances
There are a multitude of software tools and apps that can help simplify your financial operations so that they’re easier to understand, easier to forecast and consume less of your time. Talk to your accountant or financial advisor, or do the research yourself, to find out which tools are best suited to your business and can help you get, and keep, the money in your bank account.
#6. Stay on top of your cash flow
While the cash flows in and the cash flows, the goal is to get it flowing in more than it flows out. Monitoring your cash flow on an ongoing basis will help ensure it’s there when you need it and that there’s enough of it to achieve your business goals. Accounting software that connects to your bank account can give you a good idea of where your finances stand at any given time, and reviewing your cash flow regularly and can help you plan for seasonality, unexpected situations and higher-than-usual expenses.
#7. Have a back-up plan
And that leads us nicely to having a financial back-up plan. Cash flow crunches can hit every small business at some time or other, so the key is how to prepare for weathering the storm. Transfer money into an account specifically reserved for these times, register for invoice financing, or establish client retainer agreements. [any other ideas?]
For any further information about how to stay on top of your finances, talk to the team at Parallel VC / Desk Space or ask us for any other advice or recommendations.