Three good habits which make the money flow!
Here are three simple habits which will improve your small business’s cashflow, improve your business profile and relieve your bookkeeping burden, whether you do your bookkeeping yourself, or have a professional to handle it for you.
Is that a lot to promise for three simple mindset changes? You decide.
- Raise sales invoices promptly, and send them out to clients immediately.
You will not get paid, if your clients have not received an invoice. It sounds simple, but it’s surprising how many small business owners forget to raise invoices. Keep an accurate diary of work completed – not just work scheduled – and have a clear system for marking whether a job has been invoiced yet. Have a regular weekly or monthly task to review your open jobs, and double check that invoices have been raised.
Tardy invoicing sends the wrong message about your business, and clients are more likely to quibble about an invoice which is late.
Prompt invoicing sends a good clear “no nonsense” message, makes it easier for any queries to be resolved amiably while the job is still fresh in everyone’s mind, and starts the clock ticking on the ‘days to pay’.
- Pay purchases sales invoices promptly.
Nobody loves a late payer. Review your purchase invoices on receipt, raise any queries immediately and settle them promptly – and certainly within the defined terms.
Late payment does not make you look like some hard-nosed Wall Street type. It makes you look disorganized and raises questions about your cashflow management and the long term viability of your business.
Think about it this way: two of your clients need work from you, but you can only fit one of the jobs into your busy schedule. One of the clients always pays late, the other always pays promptly. Which job do you accept?
So be a prompt payer, and you will build good relationships with your suppliers and a good reputation – and that reputation will give you wiggle-room, or the basis on which to ask for favours if you need them in the future.
- Date and annotate small receipts.
You might think this only applies if you outsource your bookkeeping, but keeping good initial records gives you more flexibility to manage your work if you do your own bookkeeping.
Annotate small expenses receipts (car-parking, lunch, stationery) and make sure that the date is visible (watch out for the till receipts issued by many petrol stations which use a heat transfer process and fade away to nothing very quickly – copy or scan them if necessary)
You might think you’ll remember what all your small expenses were, and which job they related to – but if you tend to put off your bookkeeping task, you’ll find you’re wasting time cross-referencing job sheets, diaries and faded receipts in an effort to unravel things.
Just empty your pocket/wallet/purse into a box beside your desk daily or at least weekly, and check as you do so that everything has a date and note scribbled on it. It doesn’t have to be an essay – just “23/10/15 lunch Whizzo Ltd” will do.
Easy to understand expenses records will make your bookkeeping task easier and more accurate. Easier bookkeeping is less likely to get put off, and accurate records will give a clearer picture of your business’s profitability.
And if you feel you can only manage one change at a time? Then do No 1 – ‘raise sales invoices promptly’. Improved sales invoicing will improve cashflow, and that in itself will allow you to relax a bit, and then the rest will follow.