Cash flow is the core of a business, and at difficult times it can make or break your practice. Read on for tips on how to ensure that your business survives through difficult times.
Money in your pocket is worth more than a promise. That makes perfect sense when you’re thinking about your personal cash, and it applies to your business too. ‘Turnover is vanity, profit is sanity, cash is king’ is another way to say it. Having enough cash in the business is critical for both your sanity and your success. Not sure what cash flow is and how it differs from profit? There’s a handy image here that explains it all. If your cash flow dries up and you can’t pay your creditors, your business could go under and at times like these this can be a real threat. However there are some key things you can do to help your business cash flow.
Keep the money coming in is the first step. This may mean moving to ask patients to pay up front as many practices now do. Make sure you have a good system for invoicing which shows you the practices income. If you are struggling with practice finances and currently do them yourself, a bookkeeper can help.
Saving on expenses is the next step. Look at practice outgoings and consider which ones can be stopped, and where you might get a better deal. Never cancel practice insurance, but do shop around. The same applies to utility bills. If you always get basic consumables, from coffee to printer paper, from the same supplier, check out prices from other places. If you have business debts already, find out if you could switch to a lower interest product.
Marketing is a key area where business owners look to save, but remember you will still need to maintain your business presence. You may want to cancel costly advertising, but make sure you replace it with low cost social media marketing and email communications to your current customers. A referral programme can bring high rewards at low cost too.
Get wised up about what to do with those who delay payment. Chase debts firmly. Ensure that one person is responsible for this, and that they do it every week. Have a clear set of actions to follow from a first reminder to sending in debt collectors if necessary. There’s a prompt payment code that you can refer to which allows you to charge interest on late payments. This can focus the minds of late payers! By setting up the steps in advance it is easier to put them in to practice when you need. One too many bad debts can cause your business to flounder or even sink.
Pay staff and freelancers who work for you promptly. They rely on income from your business, and you rely on their good will, skills and effort, so be a great boss and pay on time. Pay other bills only when they are due. Check each invoice for payment terms and pay on the last day that the money will reach the payee in time: with modern banking money transfers are almost instant in many cases. This means that your money stays in your bank account for as long as possible, helping you to cover your costs while waiting for clients to pay you. If you are having difficulties currently due to lack of income, talk to your creditors and ask for an extension. Most people will understand that the current circumstances are exceptional.
Nowadays it’s easy to ensure that your business gets the benefit of any payment you do receive almost immediately. Ask for payments by card or BACS and the money will arrive in your account super-fast without you having to do anything other than note the invoice as paid. If you do get paid by cash or cheque, deposit it straight away. Cheques in your wallet don’t benefit the business until they actually reach the bank. Clearing times are getting faster, and paying cheques in right away cuts the risk of you losing an important payment. This all helps ensure that there is as much money as possible IN your business account, rather than sitting on your desk!
Follow these steps, and keep track of the money coming in and out of your business. You will soon find that you are on the way to having a business that is buoyant.