The top reason small businesses fail is obvious but all-too-common: they run out of money. CNBC reports poor cash flow can affect even high-revenue businesses because of simple mistakes like failing to send invoices on time. Steady cash flow means you can pay bills on time, invest, put money into savings, and reward your hard work with purchases or vacations. These tips and tricks improve your ability to ensure you don’t face a cash flow shortage.
Set Clear Expectations
Have you ever been caught in limbo between invoicing and actually getting paid? Stipulate in your contract with your client how often you’d like to be paid, whether it’s biweekly or weekly for long-term projects, every time with every project that is turned in, or another type of payment installment schedule you’d prefer. In your contracts, include pricing, rates, and the payment method you prefer, and be sure to negotiate a kill fee in case a project gets canceled.
Include stipulations regarding late payments and how those affect the work you are doing. By setting up clear expectations before you even start working for a client, you’re protecting your time and your finances.
Diversify Your Clients
One way to get money more frequently is to diversify your client base. This is wise too, because it protects your business should a client abruptly stop doing business with you. Relying on one or two significant clients means you have to start from scratch should a large portion of your income disappear. Having several clients means more income spread out over the month, so you’re always generating new income.
As you increase your client roster, you’ll be able to get a better grasp on what your typical payment schedule will be like, too.
Manage Your Budget
Because self-employment can often mean unpredictability, it’s essential to know what your financial obligations are at any given time and to stay on top of your bills. If the Canada Revenue Services (CRA) requires you to submit quarterly tax payments, it’s a good idea to regularly set aside money for these payments. Prioritizing saving money for the future better prepares you for emergencies and eventually retirement.
The Financial Consumer Agency of Canada offers tips and tools for creating a budget, and using an access-from-anywhere tool such as QuickBooks Self-Employed allows you to separate business and personal expenses easily to stay on track.
It’s ideal to pay for necessities before indulging in purchases that don’t directly benefit your business or take care of your family needs. Deposit income into savings, investments, and emergency funds first. It is better to overestimate how much you need to save than to not have saved at all. Working with a financial advisor can help you invest wisely and monitor your budget.
Get Faster Payments
Part of getting paid quickly relies on you, not just your client. You can increase your likelihood of getting a prompt payment by invoicing at the same time you turn in an assignment. You may even stipulate in your contract that you need to be paid a portion of the fee upfront before you even start working.
Regular communication with a client throughout a project also helps to increase your client’s respect of your working relationship and keep you at top of mind from project creation to payment. Some self-employed professionals even offer payment discounts to clients who pay within a few days of receiving the invoice.
Using a free invoice generator such as the QuickBooks Invoice Template helps you speed up your invoicing process. The free template includes data entry for terms, rates, activities, and more, so you can clearly present to your client what you are charging them for, to make it easier for them to pay you immediately. Using an easy-to-read template helps you stay organized, so you can keep track of when you have sent invoices and follow up if payment isn’t received.
Respect Your Time and Your Work
Just because you’re managing your own payments doesn’t mean it’s acceptable for clients to delay your payments. By setting up clear expectations, creating contracts with your clients, and sending clear invoices along with your work, you help protect your time, your work, and your finances. These practices also increase your professionalism and reinforce the relationships you have with your clients.
This step is particularly important for businesses with customers who rely on credit financing or extended payment plans. Your accounts receivable management process needs to be solid. Some tips for improving your Accounts Receivable flow are:
• Time your expense payments with your flow of receivables.
• Offer multiple ways for customers to pay.
• Invoice quickly.
• Offer discounts or bonuses for early payment.
Many businesses rely on business lines of credit, company credit cards, or business loans to address cash flow problems. Debt financing can be risky, but it’s a good idea to have established relationships with banks, just in case.
How to Improve Cash Flow
For small businesses, cash is king. Very few companies can operate without access to liquid cash for even brief periods. Unfortunately, maintaining a stable pool of funds isn’t always easy. A survey commissioned by Intuit Quickbooks in 2018 found that 64% of Canadian small business owners indicated they have cash flow issues. If you’re like these business owners, you probably want to know how to increase your cash flow. If you’re a small business owner or executive, it pays to train yourself on the basics of cash flow targeting, design, and how to react whenever your available funds dry up.
Nearly all businesses are best off by targeting clear cash flow milestones. If you haven’t done so, make sure you calculate how much cash you need to access during a given week, month, or quarter. Find out what it takes to maintain a positive cash flow, which means your business collects cash faster than it pays cash out. Once you know where your baseline is, take stock of your major variables. Identify the following groups, and write out their impact on your cash flow targets:
• Largest customers/clients
• Suppliers and contractors
• Average receivables and payables
• Seasonal sales patterns, if any
• Critical salespeople and other important employees
• Your salary
Create a Contingency Plan and Tracking System
You should create contingency plans in case one of your major variables changes over time. Next, implement and use an efficient tracking system. One thing to consider is a secure computer program or app to help monitor your fund flow. Modern systems are often very effective at warning you before real cash flow problems appear.
Streamline Payments and Invoicing with Quickbooks Online
If you run a retail business, you may rely on popular payment processing services, such as Square, to accept credit and debit cards. QuickBooks Online, the leading cloud-based financial management software for Canadian small businesses, offers seamless integration with Square through the Sync with Square app. Every new point-of-sale transaction automatically uploads to Quickbooks Online, including any taxes, fees, tips, or discounts. Not only do your new transactions seamlessly sync with the cloud, but you can also upload your past Square transactions so you have a full picture of your finances. The app keeps track of any transaction fees Square charges you, and you can create custom reports that show just the transactions you make using Square’s payment services. The app is mobile accessible and easy to learn, so you can spend more time growing your business and less time stressing over available funds.
You can also directly invoice your clients and customers using Quickbooks Online’s mobile invoicing. Quickbooks takes care of the calculations for you, including adding sales tax and deducting discounts, and automatically updates your accounting records when you send the invoice. You can also accept payments through the app and have them deposit directly into your bank account.
A little organization can help you maintain the reliable income you need and deserve as someone who is self-employed. Use these tips for getting paid promptly and keeping your business thriving. Improve your cash flow with invoices, payments, and expense tracking. See how much cash you have on hand with QuickBooks.