Chasing down cash from clients can intimidate even the most experienced small business owners. Thanks to new technology and innovative services, you can take five steps right now that will help improve your company's cash flow while reducing your stress.
Small Business Cash Flow Tips
1. Accept credit cards
According to the U.S. Small Business Administration, debit and credit card payments continue to grow in popularity for both consumer and business-to-business transactions. Accepting credit cards no longer requires specialized equipment and can help you set better boundaries with customers who typically take longer to pay their invoices.
2. Adopt an "agile billing" approach
Modernizing your invoicing system can also help you increase how frequently you get paid. "Agile development" has become popular among computer programmers because the process breaks down large projects into "sprints" of about two weeks each. Many design firms and development shops have adopted a similar approach to billing, sending out invoices or statements at least twice per month to reflect work completed instead of waiting to bill until the end of the contract.
3. Automate your accounts receivable functions
Whether you work solo or with a team, plugging your daily activities into a tracking tool can more accurately capture and categorize billable time. Many software tools now let you batch your hours and expenses into routine sweeps, automatically emailing customers on your agreed schedule. With fewer paperwork processing delays, your automated system can improve your cash flow while keeping your team focused on delivering more billable services. See if services such as Harvest, Zoho and Freshbooks make sense for you.
4. Distance yourself from collections
Many small business owners struggle to balance the "good cop" elements of winning new contracts with the "bad cop" role of getting clients to pay. A new crop of inexpensive services can outsource routine AR functions, such as calling customers to confirm that invoices have been received. These services aren't collection agencies, and they won't hassle your customers for cash.
5. Conduct routine fee reviews
The SBA recommends setting up a routine schedule for a pricing strategy review -- either monthly, quarterly, or annually. If you worry that customers might resist a price hike, the SBA suggests offering discounted retainer payments that can lock in your current rates for a fixed period of time. That way, you can pull more cash into your business from existing customers while earning higher rates for new projects.
With all five of these steps in place, your accounts receivable process can support your business even better by identifying potential problems long before they impact your cash flow. More importantly, developing a stronger AR system can reduce your stress level while helping you make better decisions about extending credit to customers.
Joe Taylor Jr. has covered personal finance and business for more than two decades. His work has been featured on NPR, CNBC, Financial Times Television, Fox Business, and ABC News. He recently completed a personal finance book entitled The Rogue Guide to Credit Cards; (Rogue Guide Books, 2012).
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