Money Management Tips for a Small Business
Managing Money in a Small Business Includes Timely Invoicing
Sep 26, 2009
Knowing the exact cash position of the business is a vital aspect of managing the progress and growth of the company. Regularly monitoring the money coming in and going out will help to identify where the business is heading, the necessity to cut costs and also manage the highs and lows of the business.
Cash Flow Forecast
The preparation of a cash flow forecast should go hand-in-hand with the preparation of the budget forecast for the business. Knowing the amount of funds available on a weekly or monthly basis will help to plan the smooth running of the enterprise.
The following tips will help to manage the cash flow efficiently.
Timely Invoicing
Set up procedures to forward invoices as soon as the product is delivered or the service is completed. Indicate a payment due by period in line with the cost of the item or service. For instance, if the invoice is for a small dollar amount, then payment in fourteen days can be quoted. High dollar value invoices may need a longer period of may be 30 days.
Discounts for Prompt Payments
If the business model allows it, offer a discount for the prompt payment of the invoice, say within seven days. This will act as an incentive for the customers to pay the invoice early. This will have the dual advantages of getting the money early as well as reducing administration costs of follow-up and reminders.
Initiate Regular Follow-ups
If a payment is not received within the quoted time period, have procedures in place to send reminders and if necessary telephone or written follow-ups. At the end of each month send a statement showing the invoice and payment details to keep the customers informed of the position with regard to their account.
Credit Checks
If the business is dealing in high value products or services, then the customers should be credit checked as to their suitability to obtain credit. This is good business practice and will avoid defaults and bad debts.
Dealing with Constant Late Payers
When customers are constantly late paying their bills, it is necessary to make a decision regarding the business relationship. Even though the customers may buy the product or service, if they do not adhere to the trading terms, they could be costing the business money. Therefore, a decision needs to be made as to whether to trade with them under different terms, for instance "cash on delivery" or other suitable arrangement.
Develop a Profession Attitude to Debt
Be very firm but polite in requesting that customers pay their debts. The product or service has been supplied; payment is due and has to be paid.
Managing money by allocating the time and resources to prepare a cash flow forecast, regularly monitoring the incoming and outgoing funds and putting procedures in place to follow-up debtors will help the smooth running and growth of the business.
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