Do you always wonder where all your money went in your small business? Are you constantly frustrated that when you check your bank statements, that you have less money than you thought you had? Do your customers pay you late or not pay you at all?
You are not alone. Many that are running small businesses will tell you that they have gone through a period of time where they did not pay as much attention to their finances as they should have.
And collection agencies that work with small business will also tell you that for many, cash flow is a top concern of those running a small business. We get calls all the time from owners and others that feel they could be doing much better with cash.
While customers not paying you on time is a big concern, there are several other things when it comes to cash that you should keep a close eye on.
Cash flow needs to take a priority in your business. When you stop paying attention to this vital part of running a business, you start playing with fire. Cash flow can disappear very quickly if you are not careful. Don’t invoice for a month or so, cash will dry up. If you invoice quarterly for your services, such as trash pickup, then try to invoice again when it gets to 90 days, you’ll have a difficult time catching up if you have more than a handful of customers that didn’t pay you. Take time each week to review the cash flow in your business. And change the intervals in which you invoice if you need to.
Cash in the bank:
We talk with small business owners all the time that may have had a bad stretch of business. Maybe it went on for over a year. They tapped into their cash savings and maybe other finances. And that kept on going to the point where they now face trouble because their financial stability is at risk. When you have less cash to back you up, that can cause stress and limit your potential for growth and sticking it out when times get tough. Make sure you are keeping a firm grip on any cash you have in the bank and do not get to the point where you are days away from a crisis.
Expenses out of control:
You would think that a business would have a handle on all the cash going out the door but you would be wrong. Take a seasonal business such as a lawncare company. When the busy season hits, everyone is out on the road and that can include you the owner. You know this already. You can be out and about for months and be telling your bookkeeper to just pay the bills. When you finally do get back to the office when things slow down, you realize you have been paying for things you don’t need or want. Sound crazy? It happens, and we hear it a lot. If you fall into this category, at least sit down once a month and review what you’re paying for. You’re never too busy to stop wasting money.
Not paying your bills:
Yeah we just talked about paying for everything but the opposite is not paying your own bills. One of the biggest mistakes you can make as a business is not paying your bills. For one, it backs you up and you think you have more cash on hand than you actually do. The second reason to pay your bills is that you are only putting another business in the situation that you don’t want to be in; someone owing you money. And third, it will eventually put a black mark on your credit. If you want people to pay you on time, you need to make sure you are paying on time.
Not getting help:
If you need third-party help in your business, you should seek that out. That’s everything from a bookkeeper, an accountant or CPA as well as other help. That also goes for help in collecting money that is owed to your business. One of the top reasons a business gets into trouble is because customers are not paying on time. You can work those accounts internally but if you don’t have the resources, the focus to do it on a regular timeframe or you just need an extra boost, hiring the right collection agency can make all the difference in the world.
Many businesses will hesitate to hire a debt collection agency because they fear they will alienate their customers and it will cost too much. But today, those in this field have a far greater appreciation for making sure everyone is treated fairly and with respect. Which will hopefully help you when you make that decision to have them contact your customers.
Want more advice on cash flow? Check out more of our blog for tips on keeping more of your hard-earned money.