4 Reasons Why Your Small Business May Still Be Struggling With Cash Flow
Maintaining a steady cash flow is something many small businesses struggle with today. In your early stages you don’t have the luxury of finance departments to handle your billing. In fact, you probably don’t even have a dedicated team member who handles your finances. As the business owner, that falls on you.
When it comes to cash flow problems, there are a few ways you can easily identify the culprit. In this article we’ll cover four reasons why your small business may still be struggling with cash flow.
You’re Still Using Snail Mail and Paper Checks
I can’t stress this enough. If you are still sending paper invoices and receiving checks for your projects, you are living in the past. Generally, you want to remove as many variables as you can when collecting payment. Snail mail simply has too many variables.
Nowadays there are plenty of online payments platforms that offer features like online invoicing and expense management. These solutions are tailored to small businesses and offer tiered pricing structures that can scale with your business. Some even offer free invoicing and only charge a per transaction fee for payment processing. Regardless what you go with, digital accounting is simply more efficient.
In addition, you will be offering your clients a multitude of payment options. Payments platforms allow your clients to pay using methods like credit cards and eCheck’s. With all this added convenience you can surely expect payments to come in on time.
You Don’t Ask for a Deposit
If you work on smaller projects this may not apply to you. However, it doesn’t mean you shouldn’t consider it. Asking for money upfront from a client is a great way to relieve some of your cash flow struggles.
This will give you some initial working capital and will ensure the client is serious about the project. If a client is reluctant to pay the deposit you may want to dig deeper to understand why. As a small business owner, you should be confident in your abilities to provide quality goods and services. If you truly believe that, you should have no issue standing firm on requiring deposits from customers.
You Weren’t Clear on Payment Terms
The best way to avoid problems on pay day is to set clear invoicing and payment terms from day one. The more room you leave for confusion the more the client will try to argue. Before you begin working for anyone, it’s imperative that you sign a contract. In that contract you need to include very detailed payment terms. These should include the due date, payment schedule, fees, penalties, and anything else you deem important. As long as your terms are fair, your client should have no problem agreeing to them.
You’re Working With The Wrong Clients
Even if you’re doing everything right, there are still ways your payments may be delayed. One of the biggest is deadbeat clients. As a business owner it’s common to jump on any client who expresses interest. Things may be going great throughout the engagement but then when it comes time to pay, things go south. Now you’re stuck chasing payments when you should be focusing on building your business.
When you begin discussions, you should always look for red flags when scoping out a project with clients. If a client seems like they are showing any of these signs, it may be better to forego the project.