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To prevent a cash flow crisis in your business means you need to account for your incoming and outgoing financials. Remember cash flow is different to profit. While your business may generate large profits, this is not going to help if it is all tied in the business.

Cash flow can become a juggling act. It is all well and good if you can bill customers for a total of €30,000 in a month and your monthly outgoings are only €19,000. Your incoming payments more than cover the outgoings. But, it is not that easy when customers pay late and leave you cash poor. This can be enough to put you out of business.  

Here are some things to help you prevent a cash flow crisis in your business.

Make Accurate Cashflow Forecasts

To track your finances, set targets for the next 12 months to avoid running out of cash. You can do this by assessing the last year’s income and sales as a guide. This works as long as you have not lost any large customers.

Use a good computer program to help you list monthly income and fixed costs. These can include wages and the costs of running the office. Remember to include variable costs such as electricity as well. Next calculate the cost of producing your goods and services, and stock. Update the figures when new orders come through.

Include cash reserves in your cashflow forecasts as you never know when an emergency arises. A breakdown in equipment or when times are slow are impossible to predict. You need to be ready for whatever emergency situations your business could face.

Do Not Delay Sending out Customer Invoices

Avoid treating invoicing as a tedious job or ignoring doing the bookwork. Small business owners can be so involved working in the business they neglect to keep up with the all-important bookkeeping. You need to stay organised.

It is important to invoice customers quickly. Send out invoices as soon as you complete the work or once a month for monthly for services. Using invoicing software cuts down the work and helps you to get paid quicker.

Give Customers Payment Options

Not everyone will want to pay using bank transfer. The more options you give them the more likely you are to receive quick payment. Cheques, cash, credit and debit cards as well as online and offline cash transfers are all handy options for customers to use.

Offer a Discount for Early Payment

While your payment terms may be a standard 30 days from the receipt of an invoice. Everyone likes to save money wherever they can. Consider offering a 5 percent discount when customers pay an account within 7 days.

Be Quick to Chase Overdue Payments

Be quick to chase overdue payments. Set out clear payment terms with your customers as soon as you start doing business with them. Using invoicing software helps you track payment dates and to identify late payments. Do not be afraid to be firm with people who always pay late.

The later people pay the more likely you are to never collect payment. Avoid this by sending out reminders for late payments. Escalate reminders if they continually miss payment dates. But you may need to get a debt collection agency involved if customers continue to ignore due dates on reminders.

Follow these simple tips to keep the cash flowing through your business.

Marc O'Dwyer

After completing a Graduate program in Marketing, Marc’s impressive sales career began at Allied Irish Banks, Pitney Bowes and Panasonic where he received numerous Irish and European sales performance awards and consistently exceeded targets and expectations. In 1992, Marc’s entrepreneurial spirit led him to set up his own business, Irish International Sales (IIS). Initially, this company was a reseller for Take 5 Accounts and Payroll software. Within four years, IIS became the largest reseller of Take 5 in Ireland, acquiring four other Take 5 resellers. He also found time to set up two mobile phone shops under the Cellular World brand and a web design company offering website design services for small businesses. In 2001, he bought the majority share in a small Irish software business, Big Red Book. At that time, the company was losing money. The company became profitable within two months, and Marc then acquired a payroll company to compliment Big Red Books Accounting products. In 2003, IIS were appointed as Channel Partners with SAP for their new SME product, SAP Business One. Marc sold his Take 5 business and concentrated on developing this new market for SAP As a result, by 2007, IIS was recognised as the largest Channel Partner for SAP in EMEA (Europe Middle East and Africa). In 2008, the IIS Sales Manager bought the Company from Marc in an MBO. He launched Big red cloud in June 2012, the online version of big red book, to date the company successfully converts 59% of trials into sales and the number of customers is growing rapidly. Marc continues to run both Big Red Book and Big Red Cloud which now support 75,000 businesses. He is a very keen sportsman, having played rugby for 20 years, represented Leinster at under 16 and under 20 levels, and league squash with Fitzwilliam Lawn Tennis Club for 10 years. Marc has competed in 11 Marathons, including the London and Boston Marathons, and has completed several Triathlons and Half Ironman races. He has also completed six Ironman Races in Austria(x2), Frankfurt (Germany), Nice (France) , Mallorca (Spain) and Copenhagen (Denmark)

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