1.Assess your current position – do a cashflow forecast
- If you don’t know how to do a cashflow forecast, ask your bookkeeper or accountant to set one up for your business.
- Itemise all your expected expenses over the next few weeks or few months if you can. Don’t forget to include those expenses listed in point 2, which you may be inclined to forget about
- Know exactly when you expect to receive payments over the same period.
- If there’s less coming in than going out, or you need to make payments before you receive income, you can move payments around by using strategy three.
2.Track hidden costs
- Not hidden but sometimes forgotten automatic debits from your account/business credit card.
- These could include insurances, memberships, subscriptions, lease payments (car, computers etc), interest payments
- I’m not saying cancel them, just don’t forget them
- Some may be more cost effective to pay for twelve months in advance, rather than monthly, when your cash position is good
- Don’t forget costs like ATO payments – BAS, instalments etc, as well as superannuation payments.
- Many of these can be ‘moved around’ – refer point 3.
3.Make arrangements with everyone
- You can pay any bill later than the due date by making an arrangement with the service provider.
- You can do this for the phone bill, the tax office, and most others. Institutional service providers are more lenient as they have thousands of customers; smaller service providers (like your bookkeeper or graphic designer for example) will be less flexible.
- Don’t forget about credit rating – you don’t want to extend beyond their timeframes and into what is categorised as being in default. Being in default can potentially impact your credit rating, so make sure you stick to agreed payment plans.
- ALWAYS communicate on an ongoing basis with your creditors, especially if you need more time to pay.
4.Increase fees 10%
- Small increases can help improve your cash flow quite quickly, particularly if you still insist on charging by the hour.
5.Retainers
- If you do work on a regular basis for any of your clients – and ideally you do – you should propose that you shift your arrangement to a retainer.
- This will give you monthly income rather than waiting for potentially months to be paid after you’ve provided the service.
6.Fees upfront
- A good strategy if you charge retainers in advance of doing the work.
- A good strategy if you charge by a project fee – typically a percentage to commence a project and a percentage on completion.
- The longer the project, the better for you if you charge more upfront, with one or two progress payments, so the bulk of the fees come to you quickly.
7.Exchange discounts for earlier payment in full
- For example, if a client elects to pay in full, you will give them a discount.
- The size of the discount is directly related to:
- How responsive the client is to reducing their costs
- How large your overall fee is
- How urgently you need the cash
- Don’t give it all away: 20% works well – it’s enough of an incentive to most clients, plus it is a cost to you but consider it a cost of acquiring cash.
8.Set terms and follow up
- Whatever terms you decide on, make sure they’re adhered to.
- Always follow up to make sure you’re paid and don’t relent.
- If you don’t want to follow up on due payments, have someone do it on your behalf.
9.Client growth
- When you need more business the golden rule is always to revisit your existing/previous clients.
- Do they need a refresher; do you have a new service to offer them; what ways can you add more value to their organisation.
- Do you have any inactive clients who you need to reactivate?
10.Find your friends
- This strategy goes hand in hand with number 9. Catch up with everyone. Where appropriate, ask for referrals to increase your potential leads; meet with ‘connectors’ to increase your contact base.
- Get out there and talk to everyone.
Finally, stay calm, stay focused on what you have to do to sort out your cash flow, then focus on getting new business and increasing your revenue in the next 30 days.
“Happiness is a positive cash flow”. Fred Adler, US Venture Capitalist
