Are you managing your business finances in the most efficient way possible?
If you own a business, you know how important it is to stay on top of your finances. One oversight, such as allowing clients to go well beyond their payment terms on your invoices, can mean big consequences for your cash flow and the overall health of your business.
There are a few money management mistakes like this that are, unfortunately, quite common in the small business owner community. Below are some tips to help you to avoid them!
By Louis Mosca
1. Never use credit cards to pay your bills.
Unless you can pay the credit card in full when the statement comes in, don’t do it. Put the credit card back in your pocket, and NEVER use it to pay bills.
2. Safeguard cash.
The old adage “Cash is King” is never more important than when you own a small business, and you have limited resources. What that means is DO NOT write checks every day! No way, no how.
3. When it comes to cash, trust no one.
If you have a bookkeeper, or a controller, who is maintaining your checkbook, make sure your bank statement is mailed to your house every month, so you get a chance to see what’s gone in and out with your own eyes. DO NOT trust anybody! That’s why big corporations have checks and balances, with double or triple sign offs on disbursements.
4. Enforce an aggressive credit and collection program.
It’s your money, and you need to make sure you are going after it as quickly as possible, when it is due to you. If your terms are net-10 days, then on the 10th day you should be on people’s butts, and knocking on doors if you have to. If your terms are net-30 days, then on the 30th day you should be haunting people. Don’t be afraid to ask “Where’s my money?”
5. Don’t be afraid to use outside services to collect your checks.
Did you know you can use FedEx to pick up checks from your clients? Fedex, and most other parcel services, offer convenient ways to schedule pickups, or arrange shipments with a few clicks of a mouse. It’s a convenient way to secure payments, and helps hold your customers accountable!
6. Rethink your payroll.
If you’re paying your payroll weekly, think about paying your payroll bi-weekly. It’s a strategy that picks up one week’s worth of float on your money.
7. If you have excess cash in the account, take it.
Don’t be afraid to take excess money as a distribution, or a loan to yourself. If you need to put it back, you can put it back. You deserve it!
8. Work with your vendors.
There is nothing wrong with asking for a discount from your vendors, for being a loyal customer. If they only offer discounts to customers who pay in 10 days, see if they’ll give you anything at 20, or 30 days. If they won’t give you a cash discount, and your vendor terms are net-30, pay them in net-45. No one’s going to have a heart attack over it, and no one wants to lose the business.
What money guidelines do you live by when it comes to your business? Let us know in the comments below! And, be sure to check out all the ways Flagship Financial Partners can help your business here.