You’ve probably heard it before, but cash flow really is king if you are running a SME. It doesn’t matter if you are expecting a cash injection in the future if you don’t have enough money to sustain you in the short-term. You have staff who expect their wage packets, suppliers and rent to pay – the list goes on.
Forecast, forecast, forecast
You cannot underestimate the importance of forecasting. Start with the amount of money that you have now, then list all of your anticipated incomings and outgoings. Be as realistic as you can be. Try not to overestimate outgoings – if anything, try to be conservative.
Be strong with terms
Late payments can be a massive problems for SMEs. Many will experience late payments that could eventually destabilise their business.
Be clear with your customers – state the terms and make sure they understand them. Also do not be afraid to chase them up as soon as they are late.
Reward good customers
If you reward your customers who pay on time, this will most likely reduce the amount of customers that are late in paying. This strategy may impact your profit margins, but it will benefit your cash flow by giving customers an incentive to pay now rather than later.
Accept credit cards
Although you may have to pay processing fees, it does ensure that you get paid instantly and removes the hassle of chasing people up if they leave it late.
Don’t bury your head in the sand
As a small business you may overshoot your projected outgoings by a mile, you also may feel like you’re burning cash. If this happens, don’t bury your head in the sand and pray for something to turn up. In this instance you will need to seek professional advice or speak to your bank to ensure minimum damage is caused to your business.