You love working with your clients, but you find that your cash flow is nowhere near as smooth as you want it to be. Some clients wait too long to pay, while other payments are grouped together and leave you high and dry the rest of the month. Overall it’s enough stress to make you tear your hair out. Instead of running away from the ebb and flow of small business cash flow, try a few methods to smooth things out:
Switch to Electronic Invoicing
You deal with a lot of paperwork on the administrative side of things. Sometimes your invoices get lost in the fray, particularly if you’re the one handling all of the accounting and paperwork. Accounting programs like Quickbooks invoicing software make it easier to send out invoices promptly so you wait less time for payment. Electronic invoicing goes right to their inbox, integrates with payment gateways, and helps you manage all outstanding invoices at a glance instead of digging through your email and paperwork.
Project Cash Flow
Do you find that your cash flow gets hit particularly hard during a certain time of year? The Small Business Administration recommends creating a cash flow chart so you have a visual look at when you receive payments from your clients to see if you have regular gaps in your cash flow.
Consider Payment Timing
Long-term clients may get complacent in sending payment. You know they get around to paying you, but it may be way later than the actual agreement. Fast Co. Design recommends releasing the final project files only after you receive complete payment, so your client has a major incentive to pay promptly. Another option is to encourage quicker payment by providing discounts for clients who pay before the agreed upon payment deadline. If your client is consistently late, have a polite discussion about contract terms and see if a different payment schedule would work better for their needs.
Switch to Milestone-Based Payments
You get paid at the beginning and end of projects, but you have a wasteland in between. This works out when you have multiple projects with staggered starts and finishes, but it’s not as good when you have all of your projects going along the same timeline. A milestone-based payment plan splits your payments over the length of the project. A typical milestone setup bills at 25 percent, 50 percent, 75 percent, and 100 percent project completion. You don’t proceed with the rest of the project until you receive payment, making this a good option for new clients who don’t want to pay upfront.
Expand Payment Options
Make it easy for your clients to pay you by offering a variety of payment options. Payment gateways and online payment options such as PayPal open up the possibility of receiving payments via credit card. Other payment methods include Google Wallet, Amazon Payments, and even crypto-currencies such as Bitcoin.