If you often find yourself struggling to meet ends meet with your small business, then you should look more carefully at your strategies for managing the firm’s cash flow. If “cash flow management” is a term with which you weren’t familiar before you started reading this article, don’t be daunted; we’re going to tell you about some neat but easy-to-learn tricks for better financial performance.
Don’t forget your breakeven point
The term “breakeven point” refers to the point where your revenues start covering your expenses. Naturally, your expenses can sometimes change, and not always due to factors within your control. Hence, continuing to meet your breakeven point can feel like pursuing a moving target.
However, it’s crucial that you continue to closely monitor your breakeven point – especially as you endeavour to grow your business. There’s a risk of trying to think too hard when chasing corporate success, but if your revenues are routinely at least as high as your expenses, you can be confident that your firm is not financially struggling. It’s a simple equation to keep in mind.
Try to limit delays to payments
Picture this: you have submitted a major piece of work that has consumed a lot of your time, but you know will bring you a lot of money – enough to plug that looming gap in your finances. Therefore, you submit the invoice and feel full of optimism… and then wait. You still wait… and wait…
Does this situation seem familiar? Unfortunately, it is what can happen if you aren’t insistent about your clients quickly making their payments. Business 2 Community advises that, if possible, you request payments that will be due straight away.
If that isn’t possible, always attempt to limit the delays to no more than 10 days. Make this net term clear to each client in advance. Through doing this, you can be confident that, when you do issue the invoice, the net term won’t be a major problem to the client.
Keep your spending restrained
This might initially appear to be an obvious piece of advice to give. However, look carefully at your expenses, even if you have already done so. It’s still common for business owners to be mistaken about what constitute genuinely necessary expenses for fuelling corporate growth.
When drawing up your budget, separate your expenses into the categories of “essential” and “nice to have”. The first of those categories should include only those expenses that have a direct effect on your company’s growth. An example of such an expense would include, if your company runs an online store, a payments solution with which payments from online shoppers can be accepted. Without this kind of solution, you can’t generate revenue online.
However, what if you would like to add some of the more “up-and-coming” payment options to the system – like Apple Pay and Android Pay? Given that it still seems more common for shoppers to use credit cards and debit cards to fund online purchases, you should probably delay adding support for the likes of Apple Pay if your corporate finances currently appear tight.
Take out suitable insurance to make yourself financially safer
If your business is UK-based, it is likely to legally require at least some form of insurance. Employers’ liability insurance is crucial for nearly all UK businesses, while public liability insurance is often recommended.
For either type of insurance, you can obtain a business insurance quote from Be Wiser Business Insurance. This can help you prepare for if your corporate activity accidentally injuries one of your employees or a member of the public who is then due financial compensation.