A big concern of many small business owners is how much cash flow is leaking out of the business undetected. Often, cash is in short supply when it’s needed most, but without a clear explanation.
Here are three simple ways to detect cash flow leaks in your business and improve your situation so you don’t have to worry if you have enough cash on hand.
1. Get Paid Now Instead of Later
How long do you wait for your clients to pay you after work is done? Do you get paid immediately, or do you have to wait for 10, 30, or even 60 days or more to get paid?
To maximize your cash flow (and even give you more momentum for pumping out the paying work), consider collecting up-front deposits or working off of a retainer, instead of automatically extending credit to your clients. (That’s what you’re doing when you don’t get paid immediately, and that is a risk and a drain on your cash flow.)
At the very least, change your payment terms to “Due Upon Receipt” if your current terms are Net 30. That will boost your cash flow
CASH FLOW MAXIMIZER: You also want to make it EASY for clients to pay you, so accept online payments to make that fast and easy. If you don’t already have this option available with your credit card merchant account, consider using PayPal or the Intuit Payment Network. Both have no monthly fees and you only pay processing fees when payment is received.
2. Do a Recurring Expense Audit
In this day and age of The Cloud, you likely have accumulated more than a few pay-as-you-go monthly fees for various apps and services. Run a year-to-date Profit & Loss Statement and take a closer look at any online services you’re paying for on an ongoing basis.
Are they still worth the expense? Are you using them? If not, cut the cord! Do not pay fees on services you don’t use. Even if you *plan* to use them in the future, don’t pay for them now. You can always sign up again when you’re ready to get your money’s worth.
I suggest you review your recurring expenses at least every 6 months so you can cut the fat to keep expenses down and maximize cash flow at all times.
3. Reconcile All Bank & Credit Card Accounts
If you’re not reconciling your bank and credit card accounts, you’re certainly not alone. Yet, neglecting this important cash flow health strategy can hide some serious cash discrepancies in your business!
When you reconcile your accounts with the bank statements you can…
- Find errors made in the bookkeeping records – both yours and the bank’s
- Avoid costly overdraft charges
- Quickly identify any fraudulent activity on your accounts, which sadly, is becoming commonplace and can easily go undetected if you don’t keep a close eye on your daily account transactions.
By simply using these three powerful cash flow tips, you can see an immediate boost in your cash flow. Of course this is just the tip of the iceberg when it comes to building a business that is a lean, mean, cash flow producing machine!
If you’d like more than 27 ways to maximize your small business cash flow and build a solid system to escape the crazy cash flow rollercoaster that can stifle your business growth (not to mention give you a lot of gray hair!), you’ll want to grab a copy of my Cash Flow Kick-Start guide, specifically designed for small business owners and self-employed professionals like you.