By Marianne Curphey
When you are first setting up your own business one of the main worries is likely to be how you will fund the transition from employee to self-employed, and how to stay financially afloat.
IThe difference between being a successful entrepreneur running a healthy small business, and a business failure, is management of cashflow.
Here are four proven ways to improve cashflow:
1. Get paid in advance
Request payment in full or in part in advance for your business services or products. This is easier if you provide services to individuals rather than large companies. In this economic environment, however, it can be a good insurance policy to request at least 50 per cent payment upfront for large projects.
Often problems arise early on in business life if you rely solely on one customer. If they are late paying you, or unable to pay, you are going to be the one that suffers. Having a number of clients who pay you at different times for different types of work spreads the risk and evens out the intervals at which you get paid.
3. Join a collective
If you have like-minded friends or colleagues you can band together to set up a subsidiary business in which you are all involved. This means you earn income from their efforts, and vice-versa, so some income is being generated when you are not working. It also helps to protect you against potential periods of ill-health when you might not be able to work.
4. Make a note of the cheque run
Every business has a date on which it pays outstanding invoices and in order to be paid as quickly as possible you need to know the date of the cheque run for each client you work for. The “cheque run” also applies to BACS payments and transfers. By submitting your invoice a day late, for example, you might wait another 30 days to be paid.