“Cash is king” is an overused expression, but it is a saying that is true and vital to a small business’s survival.
One of the main reasons why small businesses fail is due to the poor management of cash flow.
So here we have listed 5 rules for you to follow. These rules will make sure your cash works for you, not against you!
Rule 1: Keep Your Books Up To Date
Never fall behind with your accounting and reporting. Many business owners are often weeks, or sometimes even months behind.
This can lead to inconsistencies and gaps in your earnings, giving you less control over your finances. This is probably one of the most important rules when it comes to managing your cash flow.
It’s hard to manage something that’s out of date.
Rule 2: Get Your Invoicing Right
Get into the habit of sending your invoices as soon as you have delivered your product or service to a customer.
What a lot of business owners don’t release is that the likelihood of recovering what you’re owed reduces the longer you leave it.
Not only is sending out invoices on time important, but making sure you’re sending a quality invoice can make all the difference.
There are some common mistakes a lot of businesses make when it comes to invoicing. I highly recommend you go over this article and learn how to avoid some of the most common invoicing mistakes businesses are making.
Click here for The 8 Most Common Invoicing Mistakes.
Rule 3: Chase The Money You Are Owed
It is so important to collect payments on time. By letting your invoices become overdue you are putting financial stress on your business.
Sending constant reminders and following up with customers is the most effective way to get paid the money you’re owed on time. Customers are busy themselves and simply forget about the invoice. A friendly reminder email can work wonders for you.
If you have a large number of overdue invoices, Pencil can help by automating the invoice reminders as well as auto charging customers who flat-out refuse to pay.
Rule 4: Keep Business & Personal Finances Separate
This is an essential rule a lot of people forget about.
Your business finances and your personal finances should never mix, as this can leave you uncertain about the performance of your business.
By keeping them apart you will know exactly how your business is performing and able to track income and expenses a lot easier.
Rule 5: Build A Cash Reserve
Having access to a pile of cash can save a business, even in the toughest of times.
By setting aside some cash to fall back on, you cover yourself from any unexpected bills you have to pay. This is a rule a lot of business owners forget about and sadly they have paid the price when something has gone wrong.
How Pencil Helps With Small Business Cash Flow Management
Getting paid on time is no doubt one of the most important contributors to healthy cash flow.
Customers using our platform, Pencil, see a massive 80% of invoices paid within the first 5 days.
We automate the process for you. Businesses should be able to focus on what they do best and not be held back by chasing payments.
If you’re interested in getting your invoices paid on time book a demo with us to learn more!