No start up wants to turn down business. But what’s the point in spending time and effort on work that you never get paid for? It can be difficult to know whether a client is or isn’t likely to pay, but a little research can go a long way. If it’s a business, look it up on Companies House to make sure it’s legit and its finances are in order. An accountant can help you do this digging to make sure you’re not getting involved with a business that’s facing its own cash flow problems.
If in doubt, ask for a deposit
People and businesses that are happy to pay are usually happy to put down a deposit too. You could request 25% or 50% upfront, or ask them to cover the cost of any materials upfront. Not only will this ensure you have enough cash to cover immediate outgoings, but it can also help to protect your cash flow should they default later down the line.
When agreeing work with clients, you should always agree payment terms first with a written up contract. Without this, it’s much more difficult to chase payments, and you’d hit a wall if you decided to take legal action without hard evidence. Include details on when you’ll invoice them and expect payment, ways they can pay, who you’ll contact for payment and who they should contact with any queries. With clear payment terms in place, no one can pretend they weren’t sure about the payment. Just remember to stick to your end of the bargain, otherwise they might not stick to theirs.
Monitor, chase and ban
Lots of businesses have www.paydayloanstennessee.com/cities/bristol/ online systems to help with keeping track of invoices and payments coming in. They’re a good way to know where you stand with cash, and they can save you time in looking through spreadsheets trying to find one missed payment. Ideally, you should be checking this daily, so that you can quickly start to chase a payment when it’s overdue. Keeping an eye on late payments will also help you spot clients who are regularly paying late or not at all. You might want to consider banning them from your books if they’re causing a headache.
Focus on building relationships
You might feel awkward chasing payments, but if you have a good rapport with the client, it should be much easier. Not only can you drop the payment into conversation, but they’re also less likely to default if they value your relationship. Try to keep in regular contact, focus on quality and value, and act on your promises.
Keep an inventory
Unused stock could also start draining your cash, especially if you’re ordering in fresh produce that you end up having to throw away. Knowing how much to order takes experience, but it starts with keeping note of the amount you regularly order and use. Tracking this information through an inventory will help you quickly spot when stock is going to waste, enabling you to cut down on unnecessary expenses.
Don’t pay straight away
No one loves debt, but it’s something business owners have to get comfortable with. Holding onto it until other payments come in can really help you keep the cash flowing nicely. BUT that doesn’t mean you can constantly make payments late. Make sure you stay within the payment terms to avoid burning vital bridges you need to succeed.
Get a professional involved
The tips above are about putting essential cash flow measures in place, but you should never be afraid to ask for help too. Lots of businesses, big and small, have accountants to take care of all, or lots, of these steps. Because when you run a business, your mind can’t always be on the cash alone.