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Whatever the size of your business, money matters. When business is in the early stages, cash flow really can be make or break. There are some important rules to follow that mean you can stay on track and an increasing number of tech solutions worth considering to secure the path to profit.
Whether you’re still learning the ropes or business is booming, managing cash flow effectively is important for survival — statistics show us that over 60 per cent of businesses that go bust are profitable but have simply run out of cash.
This is one of the most important skills that small-business owners can master. It’s vital that you monitor money coming in and going out. After all, turning a decent profit is what keeps you in business.
Real time sales data used to be something that was only available to large businesses. Times have changed, and now there are many affordable (or free!) software solutions available that give you up-to-the-minute sales data so you can make smart decisions about cash flow. Different types of software will connect to your point-of-sale and payments hardware to allow you to access insights cleverly collated from your daily transactions. Data can also be used to work smarter by tracking sales trends and allowing you to adjust business according to when you know you're busy.
Research shows that 62 per cent of UK SME’s invoices are paid after the due date, with one in five not settled until two weeks after they fall due. Make sure payment terms are clear from the outset by advertising and highlighting them with buyers ahead of the purchase. You may also want to consider making your payment terms 14 days or fewer to ensure you’re not waiting too long between payments.
If you send invoices regularly, look for tools that allow you to send invoices out online (sometimes called e-invoices) or via email. The best invoicing tools allow you to track your invoices, send reminders if they haven’t been paid and let your clients pay by card.
If you have no idea where to start with a business plan, there are plenty of templates that are free to use online. By setting out your strategy and understanding a clear path to achieving your goals, you will be able to budget where necessary and understand where and when you need to spend your hard earned cash. A solid plan will allow you to forecast and more effectively manage your future cash flow.
Even with the best plans in place, unexpected expenses can arise — whether that’s something as simple as replacement shop furniture, or a gap in your forecasted sales that needs to be filled. You can ensure that you are prepared for this by always having a buffer to compensate for what might be just around the corner.
Most businesses can save more money if they take a good look at their spending habits. For example, there may be business transactions you’re making where both parties would benefit from trading or bartering goods or services instead.
Another idea is to weigh up the pros and cons of accepting alternative payment methods. Some services, such as credit cards, may charge you to receive payments, but this is balanced with the extra sales you’ll make, the added convenience for customers and the time saved at the bank.
When it comes to cash flow management, it takes time to develop a robust strategy that works for your business; it’s something that comes with experience. But these simple tips and technological insights will help you to gain a better grasp of the way finances are running in your small business.
Start selling with Square and managing your cash flow more effectively today. Visit www.squareup.com to discover how to find the best solution for your business.