Positive cash flow is the lifeblood of any new small business. Unless you’ve got millions sitting in the bank, you’ll need to carefully manage how much cash is flowing in and out of your new business every week. If more goes out than comes in, you’ve got big troubles that could result in bankruptcy.
The secret to positive cash flow is to keep your expenses down and to get paid early. Here’s how:
– Ask for full payment. It never hurts to ask for payment in advance, especially if you’re running a service-based business or shipping products ordered specifically for your customer. Airlines, schools and insurance companies take our money up front, and we all pay it without question.
– Ask for a deposit. Failing full payment up front, negotiate a deposit or retainer to start the work proposed or to initiate shipping to your customer. Aim to get half or at least one quarter of the total order amount. Negotiate terms for the balance owing of no more than 14 days.
– Accept credit cards. A merchant account will allow you to charge customer credit cards. An increasing number of businesses prefer to pay their bills with company credit cards. Also, you’ll likely get paid earlier than by cheque and invoice.