You’re working harder than ever. So why are you cash-strapped? For many small business owners and self-employed people, cash flow is the problem. Even though you make good earnings annually, there are those times when revenue slows down to a drip.
The good news is that you can prevent cash flow problems or get out of this financial pit if you’re already in it. Here’s what to do.
- Be Smart about Screening your Clients
If you’re like other businesspeople, you love closing the deal because it translates into additional income. However, if a client wants to contract your services for a large project, it’s a good idea to insist on working with on a small project first and then scale up from there.
Working on the smaller project lets you learn how the client handles payments. If settling a $1,000 invoice takes the client three or four months, imagine how long it would take them to settle the payment for a $10,000 project. You might want to consider finding work elsewhere because your bills are typically going to be due every month.
- Avoid Relying on a single Client
If your business has only one client, you’re going to be cash-strapped every time there’s a delay in the payment process. In case the client faces financial difficulties and postpone paying you, you can easily go bankrupt. You’re at the client’s mercy.
Improve your income security by adding a few more clients but be careful not to spread yourself too thin. You can easily find new clients by setting up a customer trade show displays from an award-winning exhibit design and fabrication house such as ExpoMarketing.
- Outsource your Billing Process
If you’re a freelancer, you can minimize the risk of delayed payments by onboarding some of your clients to a freelance working platform such as Fiverr, Upwork and Freelancer.com among others. These platforms will take a portion of your pay in exchange for managing your billing and collecting money from clients on your behalf.
Clients who use these platforms are required to pay freelancers after specified periods (such as weekly or monthly) or after a freelancer hit a predetermined milestone in a project they’re hired to do. Furthermore, payments made on these platforms are secure.
- Learn to Negotiate Contracts like a Pro
Demand a substantial upfront deposit and payments at specified points of progress if this is standard practice in your industry. Avoid billing for the entire project at the end. Invoice retainer payments at the beginning of the month, with a due date of seven to ten days later. Rarely are small businesses able to finance their clients’ projects; avoid entering such an arrangement.
If your business or profession is in an industry where an upfront deposit isn’t customary and payments typically take 30 days—as is the case with large corporations—consider offering an early-payments discount as an incentive. Be sure to record the discount dollar amount as an expense in your accounting software.
- Have A Safety Net
It’s advisable for your business to have at least one credit card and, if possible, a line of credit with its bank for emergencies, especially if you have a payroll. If you have good credit and manage your debt well, most banks will provide you with a business credit card.