Cash flow fluctuations can make it tough for entrepreneurs to keep their business finances under control. Ultimately, your cash flow can vary for a variety of reasons. As a business owner, your priority is to understand the triggers for high and low flow. Indeed, the better you understand those, the easier it is to take action and reduce uncertainty. 

A healthy cash flow can help with day-to-day expenses and operations. Contrary to common belief, your cash flow and your profit are two different entities that can both affect the company’s survival. Lack of profit is the most commonly mentioned cause of business collapse. But fluctuating cash flow could dramatically affect your finances, leading to the inability to pay invoices on time, invest in new opportunities, and recover your credit score. Maintaining a healthy cash flow requires a proactive strategy that can identify and manage risks:

• Seeking new clients and projects
• Accurate work and invoice forecast
• Growth investments

But beware of these frequently overlooked risks that can take a toll on your cash flow:

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Ineffective payment terms

What are the right payment terms for your business? There is, unfortunately, no right or wrong answer. It will depend entirely on your financial health and your clients. For a lot of small businesses, it may be tempting to match corporates’ generous payment terms, such as 60 or 90 days payments or even monthly payment intervals. However, it can delay cost recovery and leave the company facing incoming invoices with low or negative cash flow. Therefore, you may want to set payment terms that will preserve your need for immediate cash. In the meantime, it can be helpful to sell annuities so you can get cash for annuity payments and protect your cash flow. 

Inadequate technology

The pandemic has taught business owners to seek digital and modern technology for day-to-day operations. Unfortunately, digitizing your activities comes at a high risk. Indeed, companies have been forced to transform their technology rapidly and on a reduced budget. Therefore, you might find that your chosen solutions can increase security risks, affect productivity, or even make you vulnerable to competitors. Failing to invest in the right tech for your business can increase operational costs through productivity loss, work quality impairments, and customer loss. 

High turnover rate

Remote work options and the growing need for specialist talent have created a unique employment market where professional skills are high in demand and volatile. Employees are prone to quit and move to the next opportunity fast. As a result, businesses could face a high turnover rate. You may assume that employees are easy to replace. However, employee turnover can drive your costs up, involving recruitment and training costs. According to the American Center for Progress, replacing a mid-level employee costs around 20% annual salary and an executive-level employee over 200% annual salary. Additionally, it can also damage your cash flow, as employee turnover can decrease productivity, team morale, input quality, and customer satisfaction. As a result, the business may have lower cash flow without necessarily reducing expenses.  

Cash flow is the blood of a company, keeping it operational by fueling investments and managing invoices. Unfortunately, more and more businesses fail to identify obstacles in their affairs that can wound the cash flow. Just as blood loss can weaken the body and damage organ functions, a negative cash flow can devastate the business’s health.

Are you having trouble with your invoiced payments? You can’t run a business if you can’t get paid fast. Here’s what to do to get paid on time everytime.

On paper, the premise of freelance work is simple. You provide a job or service, and you receive a fixed payment for it. Right?

However, if you’re among the 57 million freelancers working in America, the formula may not be so simple. From unpaid invoices to late payments to miscommunication issues with your clients, it’s frustrating to chase down your funds.

If you run a business, you need to get paid fast- on time, every time. Let’s get into the top tips for success.

Understand Why The Payments Are Late

To identify a solution, you first need to target the problem. In other words, what exactly is going on?

There could be a couple of scenarios at play here. On the one hand, a long-time client may make a one-time mistake. This is normal, as we’re all busy humans with full schedules.

On the other hand, if you’re working with someone new and a late payment happens, there’s a very good chance of this history repeating itself.

It’s also important to identify if you are part of the problem. For example, are you being too nonchalant with how you expect payments? Are you sending invoices weeks after completing the work?

Identify and Specify Your Payment Requirements

When you work as an independent contractor or freelancer, it’s usually up to you to determine what the payment calendar and schedule looks like.

This means you need to identify the cost of time and labor and specify how and when you expect to get paid.

You need to specify these requirements and expectations from the beginning of your working relationship. Don’t expect your clients to read your mind. After all, it’s usually not their top concern to think about when their contractors receive payment.

Get It In Writing

Before you even begin any contract work with a company, its best to have both a verbal and written understanding about the work, payment, and communication.

This is where many people start with upfront deposits. It’s not uncommon to request a 50$ deposit prior to beginning work. This provides both the freelancer and the company to put some skin in the game.

Furthermore, a legal contract protects you in the event of your client skipping out or underpaying you. Setting up a contract may require consulting with a lawyer, but this is usually worth the financial peace of mind.

Encourage Incentives

Some freelancers incentivize their customers by offering small discounts for paying ‘in full’ or even making early payments.

This is, of course, at your discretion, but it can serve two purposes. On the one hand, you establish a protocol for increasing your chance of getting paid on time (or even early). For two, you’re rewarding customer loyalty, and that can improve your reputation and overall business structure.

However, don’t assume that clients will know about these incentives. Make sure that you show the price differences, send out flyers or make a note when drafting out your invoices. You want the incentives to be obvious and enticing!

Finally, you can also offer incentives for different modes of payment (such as using an electric check instead of a credit card).

Automate Your Payments

If you truly want to eliminate late payments, it’s worth considering whether you should automate your billing system. In doing this, you automatically process your payments without the hassle of manually invoicing and sending out reminders.

Fortunately, the process of how to use automation software is fairly straightforward. You will input the vendor’s name, contact information, and tax ID number.

From there, you can verify payments, monitor changes, create audits, and essentially streamline your accounts.

This is usually advantageous if you work with clients in providing recurring services. If you have many clients on the books, it’s easy for you to get overwhelmed or even forgetful about the services your render.

Automating will help you save time- and it could help you earn faster money without all the headaches of reminding your clients.

Have Protocol For Late Payment Management

Payment still not received? You need to establish authority and ownership by taking action.

Once the invoice or payment is overdue, you need to send out a reminder within 48 hours to the company. Still no word? Send out another.

At that point, you need to remind your customer that you do retain the legal rights to charge interest on their debts.

Yes, you may hear excuses, and you’ll need to learn how to deal with those. Customers will blame other colleagues. They’ll tell you about their financial problems. They may even try to coerce you into a lower rate.

If needed, you may have to locate a reputable debt collection agency and tell your consumer that to establish your intentions.

In other words? Don’t just ignore the problem and hope that it goes away on its own. While some customers occasionally forget to make a payment, this shouldn’t be a pattern.

It’s normal for first-time entrepreneurs to doubt their work or skills, but that doesn’t mean you should overlook your worth.

After all, you have expenses to pay and a business to run. Don’t feel nervous to take further action for those who disregard your business practices.

Final Thoughts On How To Get Paid Fast

No matter how amazing your business is, it’s not worth any of the work if you aren’t receiving the compensation you deserve.

You deserve to get paid fast and on time without questions or concerns. You and your business are both valuable, and you need customers who can and will validate you for that!

Interested in learning more about improving your career or creating the business of your dreams? Contact me today!