Poor cash flow is the main reason that businesses fail. It’s all well and good looking at your figures and finding that you’re making a profit but if your cash flow is not consistent this can have a huge impact on your finances. Your business can only be sustainable if you have a steady cash flow stream. There are a few things you can do right now to improve your cash flow.
Review outgoings
It can be easy to forget to review what’s leaving your bank account. Once you have direct debits set up you don’t have to worry about making the payments. The problem with this is that you forget to review whether or not these payments are still essential to your business. You’d be surprised at how many clients come to us not knowing what certain payments are which leave their bank accounts each month, or we find that they are paying for things they no longer need. Any software subscriptions which you don’t use to their full potential or any which are just no longer necessary to your business need to be cancelled. Freeing up some cash no matter how little it is will help. We advise on reviewing your outgoings on a quarterly basis at least.
Review your pricing structure
Do you review how much you charge? You should review your pricing on at least an annual basis. The cost of living is rising which means so are your outgoings. This may mean you have to increase your prices in order to increase your profit margin. Don’t be afraid to charge your worth and inflate your prices to reflect the cost of living.
Invoice on time every time
Did you know you can set up recurring invoices in Xero? This is helpful if your clients pay for the same thing each month. If their invoices differ slightly then you can set up their invoices to go into draft for you to amend before sending. This will save you a lot of time. Remember the earlier you invoice the quicker you will be paid. Make it easy for your clients to pay you by using software such as GoCardless or Stripe.
Credit Control
Credit control isn’t a nice task and can often leave you feeling uncomfortable. Remember the later people pay you the more impact it has on your cash flow. Chasing payments regularly shows that you’re on the ball when it comes to your finances. You’ve done the work and need to be paid for what you’ve done. Credit control can be polite and friendly, it doesn’t have to get nasty, after all you want repeat custom. If you don’t have the time then we can act as your credit control department. You’re more likely to get paid on time in future if your client knows they will be chased.
Keep on top of your bookkeeping
Your bookkeeping probably isn’t a task which you prioritise. Client work will always come first. That’s why if you’re busy you’re best to leave the bookkeeping to a professional. The more consistent you are with your bookkeeping the more aware you will be about your financial position. You’ll be able to make more accurate business decisions. By having a bookkeeper as part of your team they will be able to monitor your cash flow, giving you advice on how to improve it so you’re never left in a sticky situation.
Of course making a profit in business is what you aim for as a business owner but if your cash flow isn’t healthy and consistent it can soon lead your business in the wrong direction.
Make changes today to improve your cash flow and you know where we are if you need our assistance.
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