Cash is often described of as oxygen in a small business. We feel better with it, we feel more confident in our business abilities and decisions when we know there is cash in the bank. So, how do we manage our finances knowing our sales might be seasonal, weather dependent or just randomly inconsistent?
Here are three practical things you can implement into your small business:
1. Aim to have at least one month worth of total expenses as your ‘buffer’. Three months is the ideal, but one month is definitely fine to start with.
2. It’s ok to have late payment fees on your invoices. It’s also ok to add them when needed. Essentially, you are training your customers to pay you on time. We set ourselves the standard of excellence in how we deliver our product or service, that we pay our supplier invoices on time; we should then set the same expectation of our customers. Advise customers of this potential late fee in your terms and conditions on all quotes and have it written again on each invoice you send.
3. Pay yourself first. When money comes in, it’s often our first port of call to pay the mortgage/rent/staff then grab the pile of invoices waiting and continue paying out. But… don’t. The first payment you should make when money comes in is to yourself. What happens is when we pay ourselves first is we create stability in our home, which is where we go to rest. Your spouse feels settled, your home bills, kids school or daycare fees are covered and there is food on the table.
From time to time, it can feel like your standard of excellence to pay others on time is compromised. These situations can be and often are stressful, putting you under pressure. Pressure that forces you to think smarter and more creatively in how you can pay all of your invoices on time.
Your ideas and actions in these moments remarkably grow your business to a new level that would not have come about otherwise. In these times, don’t fight the pressure by being tempted not pay yourself. Pay yourself first and welcome the challenge to get bigger and better.
When you are small you might feel like you are having little impact in either area but starting small is where we all began. Remember, a tree was once a seed. Keep going, you are doing better than you think you are!
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