Whether you’ve got a huge business or, as we’ll talk about here, a home-based business, cash flow is one of the most important things you can focus on. Many businesses do not fail because people stop wanting to work with them – they fail because they simply do not have enough cash flowing through their business at one time. Let that sink in! You could fail because of your own money management issues, rather than your business not being a hit.
Let’s talk about what you should know in regards to cash flow and your home business.
Getting Your Invoicing Right
Do not wait to invoice somebody once you have delivered a product or service. This will
seriously hurt your cash flow and business. You need to have a prompt invoicing process, so get into the habit of sending invoices quickly. You could send invoices immediately, or on a daily basis, depending on what you do.
If you provide a service, it could even be a good idea to ask for a deposit, or part payment part way through. This can help your cash flow immensely and is a reasonable request.
The sooner your invoice, the sooner you’ll receive payment – but this doesn’t always mean a client will pay straight away, or even on time. Have a prompt follow up service, too. Don’t give them a chance to forget that they owe you for your services. There’s software that can help you with this, and you can even use services like BCashflow Positive Positive to pay off some of your invoices while you wait if you need more cash.
Don’t Be Too Lenient
You must be fair, but you can’t be a pushover, either. If somebody isn’t paying, make sure you ask them if there’s anything you can do to help – for instance, allow them to pay in installments. However, don’t be afraid to take more formal action if you need to. You should make sure you have an eye on your accounts receivable turnover all the time.
Don’t Overcomplicate Your Accounting
Even though you’re a small home business, hiring a professional accountant could still be a good idea. You can also use high-quality accounting software to help you and track the numbers. You will be able to use this to forecast things like cash flow for your planning purposes.
Separate Your Business And Personal Finances
Mixing business and personal finances is a recipe for disaster, as it can leave you unsure of your business performance. You need to keep these two things separate so you can see what’s going on more clearly – it’s also much better for your accounting.
Have Some Cash In Reserve
Access to emergency cash could help your business to stay up and running when you really need it. Building a cash reserve will help you to manage cash flow like the experts. You’ll have peace of mind, as well as money for emergencies so you don’t have to take out high-interest loans. Cash in reserve will also allow you to take advantage of opportunities when they present themselves.