As you’ll no doubt realise, cashflow is critical to any business. If you’re like most other business owners, it’s probably the thing keeping you awake at night. To help, here’s a few tips we’ve used successfully in the past to help our customers sleep better at night.
It’s important to measure how long on average customers take to pay. You also need to know how long stock sits on the shelves or how long jobs take to get out the door. Once you’ve measured these, you can set targets to improve them.
2. Get your cash in sooner
Get your invoices out the door as soon as you’ve done the job – don’t wait until the end of the month to invoice. Change your payment terms to 14 days after invoice, not the 20th of the following month – sure, some customers may still wait until the 20th but others will comply with the new payment terms (that’s a win). Make it easy for your customers to pay – why not have a “pay now” button on your invoices so customers can pay immediately on credit card?
3. Get clever with your funding
If you’re in a boom and bust industry, you might find it tough to pay yourself every week. Cleaver banking systems can help you smooth your income, making it easier for you to live on a day-to-day basis. Also, get help with the funding on working capital – don’t just fund it out of your own pocket. If you’d like a once-over of your banking setup we can put in touch with people who can help.
4. Monitor your stock
If you’ve got old stock sitting on your shelves then your cashflow is being damaged. You’ve paid your suppliers for the stock so get it sold. If that means discounting then so be it – the cost of poor cashflow is generally higher than the cost of the discount. If you’re selling time, then get jobs out the door as soon as possible. You’ve paid your staff for their time to do the work, so get the work out the door and get the cash in from your customer.
5. Clever systems can help
Systems like Xero, Debtor Daddy, Batchbook and Unleashed will help you get your invoices out the door, stock levels down, poor payers weeded out and old debts chased up. In turn this will help you get cash in quicker (and to sleep earlier at night).
If you’re after some more cashflow tips we’ve put together an eBook with 30 pages on keeping your hands on your cash for longer – check it out here.
Alternatively, checkout www.iif.co.nz or call Hamish Mexted on 04 212 4977.