So you’ve had a brilliant business idea. Now the work begins. Not only do you need to work out whether you can make enough money, but you also need to make sure that you’ll get it when you need it. You need to plan your cashflow.
All too often, new businesses fail because of cashflow problems – short-term issues that could have been avoided if the right precautions had been put in place beforehand.
If your business runs short of money, it can be difficult to negotiate finance. It’s much easier to get credit facilities when you’re doing well, so when you’re starting a new business, think ahead. Get facilities in place right at the beginning, before you need them.
Here are ten more top tips for consistent cashflow:
- Draw up a cashflow budget. Anticipate regular payments such as monthly wages and tax bills, and allow for fluctuations
- Know your finance options. Business credit cards, invoice finance, overdraft facilities, letters of credit and even government grants could help you. Talk to your bank about the possibilities.
- Credit check new customers. If you’re giving people credit, make the conditions clear.
- Don’t hang about. Issue invoices promptly and chase them up (or make sure an employee does) when they’re overdue.
- Be prepared to claim interest for late payment. It’s your legal right, and even just the threat of it can hurry the money along.
- Monitor your performance. Set performance indicators (sales per month, for example) and recognise when cashflow might fall below your projected budget.
- Hire when necessary. You don’t always have to buy equipment. Hire-purchase or leasing may be the better option.
- Give discounts for cash. If you need to, offer incentives for fast settlement or cash payments.
- Keep an eye on suppliers. Make sure their invoices are accurate and try to negotiate longer payment periods to give you breathing space.
- Take stock. Don’t tie your cash up in unsold goods. Establish an efficient turnover of stock that frees up cash but is flexible enough to meet demand.
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