In entrepreneurship, they say that cash is king.
Accurate that may be, but the depressed trading and economic climate and the rising cost of living and production mean consumers are either cutting back on their spending and relying more heavily on credit.
Considering that these factors are bound to impact your business at some stage in the future, it’s a good time to get ahead of any potential cash flow issues that could creep in faster than you are able to spot.
Now more than ever, Business Partners MD Ben Bierman, is the time for entrepreneurs to step up their hustle game if they want to successfully navigate the downturn.
Central to maintaining a steady revenue stream is ensuring that you not only retain, but also grow your customer or client base and this requires some out-of-the-box thinking.
READ MORE: How to take care of your cash flow
Bierman says offering incentives like discounts for upfront payments is one way small business-owners can go about getting customers to pay up quickly.
“By giving your customers your best, they will also tend to pay you first. Build a sound relationship with your customers and the key people within your business – not only the person who makes the buying decision, but also the one who pays the accounts,” Mike Anderson, founder and CEO of the National Small Business Chamber, advises.
“Once you have successfully delivered the service, the money owed to you should be in your bank. You can get some customers to pay immediately by offering them a quick settlement discount if they pay within a certain period. A discount of 2%-5% for paying within seven days will give your cash flow a healthy boost.”
He says entrepreneurs should also pay attention to invoicing timeously and accurately.
“Invoice right away, not just at month-end. Also, ensure that the invoice details are correct. Your customers will often only advise you of an incorrect invoice some time down the line. This can result in lengthy delays in you receiving money that is due to you,” Anderson advises.
READ MORE: Helping small businesses stay open
It’s a good idea to follow up with a call once you’ve sent an invoice just to confirm receipt and accuracy – it will save you hassles down the line.
Another way you can manage your cash flow is by asking for partial payment upfront, where possible. “Instead of waiting to invoice until a job is completed, ask for a percentage of the invoice to be paid up-front. This is common business practice and one you should capitalise on, if you can,” says Anderson.
It might also be time to sharpen up your negotiation skills, because if you can successfully renegotiate payment terms with suppliers, you might be able to better align customer and supplier payments, reducing the gap.