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Finding, getting, and then keeping customers may be the three hardest jobs for any small, medium, or large business.
Number four is managing cash.
It sounds simple in theory, but is it?
It can be. It just takes a little pre-planning on your part and steely determination to not ignore your cash flow problems. That way lies madness.
These cashflow “hacks” are great practices that can alleviate stress and panic around finances for business owners. Each of these is pulled from real-life examples of small businesses like yours. Take their advice and get ahead of your cash flow problems before they take control of you.
Reconcile cash daily or weekly at a minimum.
Example: A lawn services firm doing over $1 million in revenue was having the business owner’s wife do the bookkeeping. Now, this can work for your business, but only if you know what you are doing or have a pro on your side to guide you. The owner’s wife hated reconciling cash more than an unexpected trip to the dentist.
I was tempted to tell her that marketing majors don’t make great bookkeepers, but since she was the wife of the owner, we developed a game plan instead.
Since she had to research errors occurring as many as three to four weeks prior to the statement date, this slowed her down. We suggested that she follow up on errors as close to the date they occurred. And that’s when she agreed that doing daily reconciliations was the way to go.
She loved it. (And that’s even coming from a marketing major forced into bookkeeping.)
Monthly reconciliations can be an arduous task. If you find that is the case for you, swap it for daily or weekly reconciliations. Taking smaller bites out of big projects makes things easier to manage and more likely to get done.
You might even follow LessAccounting’s suggested bookkeeping schedule.
Manage your receivables like a bank does its loan book.
This means having a follow-up schedule for unpaid invoices is key to keeping your business healthy.
Pick one day a week to go through your aging report and call those that are past due asking when you can expect payment. We love a good Tuesday morning (Mondays are generally busy, Thursdays/Fridays are too close to the weekend). Just pick a day that works for you and stick to it every week.
Call, email, or text, but be consistent in your attempts to collect. Clients will come to know that you’ll be calling them one day after it’s due.
Follow this practice and you’ll have trained customers who know you mean business when it comes to paying on time. Here are some example emails to help collect unpaid invoices.
Look for season cashflow trends and plan for them.
Your accounting system is one big history book. And you loved history as a kid, right?
You like to know what’s happened in your business. So does the tax person. But what about tomorrow? It would be nice if you could tell the future of your business…That’s where a simplified weekly cash flow forecast comes in. This forecasting spreadsheet can be a great management tool for any small business in providing insights about your future cash balance.
Many small business owners don’t even realize this tool is available to them.
Intrigued? Have your CPA or tax person tailor a version just for you. You can have these tools spanning a rolling four-week time period. Some are eight weeks. Many are 13 weeks. One e-commerce client maintains a 52-week cash flow forecast. He might be unconventional, but he loves it and it helps his business.
The important thing is that you create a tool that works for you. One you can understand and that provides the insights you need to make decisions for your business.
Can you imagine what your business will look like if you implement one, two, or all three of the cash flow hacks above? Think you’ll have a more stable business?
Probably so. It’s your move and it’s your business.
Here are more ways to avoid cash flow problems.
But our personal favorite it to outsource it to the pros. Check out our friendly and affordable bookkeeping services perfectly tailored for freelancers, solopreneurs, and small business owners.
Life is really good for the bookkeeping wife. Or should I say ex-bookkeeping wife? Oh no, it’s not what you are thinking. Her husband’s business recently passed $3 million in sales allowing them to hire a ‘real’ bookkeeper (one without a marketing degree). But that’s only part of the story. She’s following a passion and now runs a small photography business, and she loves it.
I wonder who does her bookkeeping?