Are you not getting paid on time? Are you having difficulty following up with customers who refuse to pay or delay payments? Well, all this can be devastating for your small business!
The good news is that it does not have to be this way. There are things you can do that will help your customers pay you on time. The way you provide quotations, the way you communicate, the way you write out contracts and a variety of other actions are responsible for whether your customers pay up on time.
So how do you overcome the hurdles of a bad cash flow? Here are 5 tips that will help you ensure a better cash flow management for your small business.
1. Expiry dates on quotations
It is quite normal for people to ask for quotations from several contractors before deciding on any one of them. So whether you are selling a product or a service, it is a good idea to be clever with your quote. When you quote a price, make sure that you mention an expiry date on it.
When you mention an expiry date on a particular price point, the customer is aware that he has to contract your small business within the stipulated date. Also, this way, you can ensure that you are better able to deal with the rise in costs and raw materials.
2. Ask for an upfront deposit
This makes sense, especially if to fulfil the customer’s order, you need a good amount of money for raw materials that need to be purchased. For example, you may be contracted for a service that takes you 2 months to complete and you need a substantial amount of money to get it done.
Why bear the costs yourself when your customer can place an upfront deposit to manage the cash flow better?
3. Have clear-cut terms and conditions
A lot of small businesses make the mistake of not having clear-cut terms and conditions documented right into the contracts they give their customers before commencement of work.
Don’t make this mistake. If you are not confident of doing this on your own, get legal help.
4. Get paid for any additional work
The truth is that customers can be problematic. For instance, you may have agreed to provide a certain service at a particular price. But the customer keeps on asking you to do more at the same price. To keep him happy, you do all of it.
When the time comes to pay up, he does not want to pay for any additional work. To protect yourself against such things, make sure that it is mentioned clearly in your contract that any additional work that is done by your business calls for additional charges.
5. A detailed quote is your best chance of getting paid
Pay a little extra for a good attorney to help you draw up a detailed quote and contract you can present your potential customers with. This is a worthwhile investment that cuts out any surprises and will improve your chances of being paid on time.
Cash flow problems happen with most businesses but small businesses are the worse affected.