But now the new year is already in its second month and, for small business owners, this can be a grim time to manage cash flow.
Here are tips on how to manage cash flow and effectively position your business for a successful year ahead:
(1) Set cash flow targets
January is a good time to prepare and maintain a cash flow forecast. This forecast will tell you if your business will have enough money to run the business or to expand it. You will also be able to determine if you are making or spending more money. Review your forecast at least every six months, so you can identify potential shortfalls in advance.
(2) Agree on clear payment terms
It’s essential that you agree on clear payment terms from the outset. To ensure you get paid on time – formalise your payment terms in your client contracts.
(3) Invoice quickly
Your invoice is a chance to inform and remind your clients of what you agreed to and that you’ve delivered. Ideally, you should act fast to deliver and invoice clients as soon as the work is completed. If you wait two weeks or even a month after the work has been done, you may not get paid for 60 or even 90 days.
(4) Use technology
The days of having to use Excel spreadsheets and paper to record expenses and invoices are long gone. Accounting software packages can now be fully integrated with your bank account and, at the press of a button, can update you on who owes what and when it was due. Invoices, statements and emails to clients when an invoice is due for payment (or overdue) can all be automated.
(5) Manage your expenses
Where cash outlays are required, plan your strategy, so you don’t have to lay out cash early in the new year. Agree on payment terms with your suppliers and negotiate these terms up front.
With some advance planning, the new year need not be a time of cash flow dread or a reason to delay your sales strategy or the launch of a new product. All you need for success is to ensure you have the right foundations in place.
Whatever your cash flow looks like, Aldes Business Brokers are here to help you negotiate the sale or purchase of a business. We have both the experience and expertise to assist you throughout the whole process. Visit www.aldes.co.zafor more information.