Cash is King...
This is a common phrase coined by many SMEs in today's market, usually referring to the "black market" of cash business, which excludes taxes all together. However, I think it has a much bigger and better message.....
Most businesses (in operation) are profitable, otherwise, they wouldn't be in business. But more often than not, they have no cash in the bank due to monies owed to them or monies they owe others. In this instance, we are still talking about "cash".
Does your business have profit, but no cash?
Most likely your cash is sitting in someone elses bank account for services/products you've already rendered. How do you relocate this cash to your bank? I'd start by focusing on the following:
- Terms of Engagement (conditions of doing business)
- Tighten your debtor policy for troubled payers (reduce the days allowed to pay)
- Ask for a deposit/part payment in advance
- Always make sure you have multiple methods of payment for your customers, the last thing you want is for payment of your invoices to be hard or a hassle. (Consider merchant facilities, online payments, paypal, EFT etc) These may have costs, but the money in your bank account will be worth it.
- Validate your customers upon engagement with trade references.
Alternatively if you have creditors or payments to make, before you enter into your transactions, find out your available financing options and speak to someone who can assess these for you and read the fine print.
Will this Scare away your customers? ....
It will not scare away your valued customers as they have an interest in your continued operation and should value your services. (Think about your favourite restaurant, cafe, bar.. you don't gawk at their payment conditions)
The ones it may scare, are cost focused. If you have to compete on price, it means you're offering a product and not a service... Which, is a problem if you're a service provider and leads to much bigger questions.
Have you mapped out your cash flow?
There is no better way to prepare for a slow cash flow period than having prepared a reserve months in advance.
If you don't know how to prepare a cashflow budget, then why not ask one of the team at Interactive how we can help your business, plan for lulls and assist in boosting your future cashflow.
