Physical cash may be going out of fashion but cash flow is still vital to the health of all businesses. Solopreneurs and SMBs don’t tend to have significant cash reserves the way some enterprises do. This means effective cash-flow management is absolutely crucial. With that in mind, here are some tips to help.
Track your revenue cycle
You may find it very helpful to use proper revenue cycle management software. If this is out of your budget, however, then even basic spreadsheets are a lot better than nothing. Peaks and troughs in revenue aren’t necessarily bad.
They do, however, indicate that you need to be very careful to avoid overspending during your peaks. This doesn’t have to mean going out and splurging. It can simply mean starting your scale-up too early and/or starting your scale-down too late.
That said, usually, if you can smooth out your revenue cycle, it’s often very much preferable to do so. For example, you might look to find alternative ways to generate income during times you predict will be quiet.
Know where you can get affordable credit
There are two main reasons why it’s important to get ahead of the game with business credit. The first is so that you can figure out your options and choose the best one(s). The second is to allow time for processing.
Ideally, you’d get preapproved for credit and renew that preapproval as necessary. Failing that, you want to know what documentation you’ll need for your application and make sure you have it to hand.
On a related point, remember that your credit record matters. That’s true for both freelancers and registered companies. Keep working on it as much as you can. Even squeezing out a few extra points can be enough to land you a better deal.
Get to grips with payments
Firstly, now is probably a very good time to review how you take payments. Depending on your business model, you may want to start expanding the payment types you will accept. For example, you might want to go beyond the old favorites of “cash and cards” (or e-wallets) and look at mobile payments, direct debits, and cryptocurrency.
That said, the more payment types you accept, the more sets of acceptance rules you have to learn. You might therefore prefer to streamline the payment types you accept. Alternatively, you might try to steer customers towards one or more preferred payment options. If you do, be careful not to break any rules with other payment schemes.
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Make sure you stay on top of the disputes/chargeback rules for any payment types you accept. Generally, staying in compliance with them is largely a matter of box-ticking and documentation. You do, however, need to know what boxes to tick and what to document and this can change over time.
Practice robust credit control
If you take payment in arrears, then you absolutely must do whatever it takes to make sure that you are not only paid but paid when your payment is due. If you can afford it, you may wish to give a discount for prompt payment. This can be a lot easier than chasing people for unpaid invoices.