Running your own business can be extremely rewarding, however there will always be times when it will be quite the opposite. Depending on the business, many factors will determine the success or failure of a small enterprise – the most common being cash flow. Outlined below are three very simple solutions to cash flow problems that will help make to your experience as a business owner more rewarding.
Without the regular inward flow of cold hard cash any business will die a natural death. Many small business owners know too well that operating in an uncertain economic environment means customers take more time to pay. If customers consistently ignore a business’s terms of payment, the health of the business will decline rapidly. Even worse, the associated stress is a danger to the health of the business owner.
If you’re finding it hard to get your customers to pay you on time, here are some simple solutions:
1. Request upfront payment. Of course, the easiest way is to get full payment upfront, but this can be difficult for most service providers, particularly with new customers. Instead, ask for a part-payment, which could be 50%-70% of the total price, prior to the full service being delivered. This not only establishes a mutual commitment by both parties but also creates a more regular flow of cash into your business.
2. Use an automatic payment service. This can be done for one-off or ongoing scheduled payments – this will assure you that you will be paid promptly and on-time. There are many reliable services available in Australia and the cost is surprisingly low. Type “direct debit payment services Australia” into your search engine, and spend some time to find the one that suits your business best. Once set up, you’ll wonder why you hadn’t set it up earlier.
3. Provide an incentive. Encourage your customers to pay before the due date by offering a small discount. Utility companies and Councils have done this for decades, and although it could reduce your profit a little, you’ll save time and energy by not having to chase late-payers. The opposite of this is another option available to you – adding interest to overdue payments. Be careful with this option as it can create more animosity when the original invoiced amount blows out of context. This option also does nothing for ongoing customer relationships.
If your customers are ‘dragging the chain’, it is likely that you will also have difficulty paying your own bills due to reduced cash flow. As you know what it feels like to have reduced cash flow, take the upper hand and explain this situation to your creditors. Most will be happy to work out a payment schedule so that everyone wins.