Do you know your numbers?
In another post I shared some easy, non-scary budgeting tips that will:
- help you understand your business, and
- create a plan for future success.
If you tend to struggle with numbers, I understand. Most of the business owners I work with have the same fears.
After all, you probably didn’t start your business because you were a finance whiz, did you? You started it because you had certain skills and experience you wanted to share with the world.
But you’ve probably learned by now that working hard and hoping for the best isn’t enough. Running a successful business means staying on top of your finances, so you know how much money you need to live on, and how much your business costs to run.
That way, you’ll not only start to understand how successful you are now, but what it will take to be even more successful in future!
In addition to budgeting and forecasting, you’ll need a strategy for managing your day-to-day business cashflow. Here are some tips (taken from my many years of experience!) to help you get started.
Don’t Spend What You Haven’t Banked
Have you ever fallen into the trap of spending money you haven’t made yet?
I definitely have.
It’s a bit like daydreaming about what you might do with the money from a Lottery win.
“It’s OK!” you might tell me. “Plenty of people have said how interested they are in buying from me. So, it’s just a matter of time before my business starts making really good money.”
But before you start spending the money you’re certain you’re about to make, have a look at the scenarios below:
- You’ve created a free offer, and some customers have promised to come back for the paid version later on
- Someone has booked a session, then not turned up
- You ran a free event, during which you shared so much information that some customers have realised that they don’t need to pay for anything else
- A customer hasn’t paid for your product or service, or they’ve only part-paid what they owe you
Have any of these scenarios happened to you? They’ve certainly happened to me, and they’ve also happened to a lot of my clients.
It’s important to remember that most of the time, customers who sign up to purchase a paid version after a free offer have every intention of doing just that.
But sometimes, the moment passes by. Life gets in the way, and enthusiasm starts to waver.
The moral of the story is that you can never really predict what customers will do – so don’t spend or invest money you haven’t actually been paid yet.
Instead, focus on how you can encourage customers to pay, then develop a robust system to manage your payment process.
Put an Invoicing System in Place…
…and you’ll not only save precious time, but you’ll also sleep more soundly at night, safe in the knowledge that you haven’t left any money on the table!
I get it. Setting up an invoicing system seems like a boring chore at first. But keeping a close eye on invoices going out and payments coming in will help you feel more secure.
Your system will also have the benefit of promoting a more professional image to your customers.
The trick is to keep your invoicing process as simple as possible – try to avoid mountains of paperwork. You could start by using an Excel spreadsheet to track your invoices, with diary reminders to chase up late payments.
If you’d rather automate the entire process, there are plenty of easy-to-use online systems available. Quickfile is completely free for small businesses, while Xero is a widely-known, paid-for system with lots of additional features and tools.
Whichever method you use, the unfortunate fact is that some of your invoices won’t be paid on time. So, make sure you stay on the ball and implement a follow-up series of emails, letters, or phone calls that will remind people to pay.
How Do Your Customers Pay You?
Have you got a system in place to accept customer payments? What do you do if someone asks about setting up a payment plan, instead of settling your invoice all in one go?
Offering different payment options means it will be easier for money to flow into your business. Aside from standard bank transfers, PayPal is a good, recognisable payment system, as are Stripe and Square.
To help me set up regular customer payment plans, I use a system called GoCardless, which has been specifically designed to take recurring payments.
(Yes, these systems will take a tiny percentage of the money received, but isn’t it better to pay that percentage, than miss out on a customer?)
How do you manage your cashflow? Any stories or advice to share? Post them below…and don’t forget to sign up to my regular newsletter for more hints and tips.
If you’d prefer a more in-depth conversation about your micro business finances, simply book a call with me today.