It can kill a small business: even if you’re doing a roaring trade, slow payments and high spending can end with you going under. Here’s how to make sure you keep the cash flowing.
When times are tough, it tends to be the small businesses that suffer most. The big companies withhold payments, credit becomes harder to come by, and you can be left with nowhere to go.
You can’t pay your staff or your bills with promises – so the first step is to chase up any outstanding invoices. Ideally, you should have a system in place that encourages prompt payment already, such as a penalty clause for late payment. Some electronic invoicing systems can send out automated email reminders to customers, chasing them up, but a quick phone call can work wonders too.
You can also offer small discounts for faster payments, or negotiate a schedule of instalments, which might suit both parties better.
At the same time, you should look at your outgoings and see if there’s room for flexibility. Talk to your suppliers and negotiate better deals based on your loyalty and the size of your transactions. Get quotes from other suppliers too.
Make sure you’re not paying over the odds for basic necessities and utilities. There are plenty of price-comparison sites online that can help you do this.
An efficiency drive can be useful at any time, but a close look at your everyday business practices could reveal small changes that might, taken together, save you a significant amount. Turning off all the lights outside working hours, using both sides of every piece of paper, and shutting down computers over lunchtime (not leaving them to ‘sleep’) can save you money as well as benefit the environment.
As an extra precaution, talk to your bank about your options. They might be able to extend your overdraft limit, provide a short-term loan, or offer credit based on the value of your outstanding invoices through factoring or invoice finance.
Just make sure you address the subject early, before it becomes a real problem. When it comes to cashflow issues, prevention is always better than cure.
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