Starting a new business can be both exciting and daunting and unfortunately those first five years of starting your own company can be the most unpredictable. If this is your first business venture, not only are you settling into your new role of running a company, but your business is also finding its place in the market. Learning what your audience wants and needs and how to sell to them could take you some time, which in turn, could affect your finances. Most businesses experience a rollercoaster when it comes to their finances, sometimes they go up and sometimes they go down. It’s important to try to have a balance, have a safety net and try to keep your cashflow stable.
Here are some top tips on how to manage your finances in those early yet crucial years to drive long term success.
Set your foundations
When you start up your business, setting foundations is critical. More and more businesses are turning to company credit checking to avoid getting their fingers burnt in the first place when it comes to late payments. Remember, if you don’t get paid, your business can’t move forward or even survive. Don’t make the mistake of only looking for help after the damage has been done, prevention is better than cure so get your due diligence systems in place now. Creditsafe offer company credit reports on over 190 million businesses worldwide. They offer information on key financials, a company’s payment habits plus much more; helping you to make better decisions faster. If you know a company’s payment terms, you know when to expect payment from them, allowing you to manage your cashflow and finances more efficiently.
Personalise your payment approach
When you have new customers on board try to build a relationship before sending out invoices. Some customers could get offended if the only time you speak to them is when you are demanding money, so by building a relationship that encourages communication on a regular basis, they will feel more valued and appreciated by your business and will be more inclined to pay you sooner. Customers who feel valued are more likely to be returning customers than customers who aren’t. Make a habit of sending follow up emails or calls to see if they are happy with your product or services and if there is anything else you could help them with. If they have a good experience with you they will use your services again, and as customer retention is one of the biggest sales generators it’s worth taking time to perfect this. By personalising your payment approach, you are more likely to get payment in on time or even early if you have a good relationship with your customers.
Monitor your customer base
Late payments can damage your finances no end, so always monitor your customers to keep an eye on their Days Beyond Terms (DBT); (these are the amount of days it takes them to pay their bills beyond the initial term). By monitoring this, you are able to forecast the delay in your cashflow and make arrangements for your own bills. There are countless companies who have gone into administration and then their suppliers have suffered the domino effect of not getting paid. Knowledge is power, so staying in the loop of your customers’ changing credit reports can keep you one step ahead at all times and aid you in protecting your cashflow. Creditsafe have Risk Tracker, which is a tool designed to monitor your customer base for you on a daily basis. If anything changes on your customer’s credit report you will be notified by email.
Stay on top of your cashflow
Your cashflow is the life blood of your business and keeping the cash flowing will aid you in running your business smoothly. A healthy cashflow will allow you to pay your own bills which will also aid your suppliers’ cashflow. It’s a revolving circle that ensures businesses keep moving, hence if one link of the cashflow falters, it could have a knock on effect for everyone else including your own business. By keeping on top of your customers and your invoices, you are able to make sure invoices are sent out on time, later chased up and money is coming into your business. Leave a considerable amount of time from money coming in to money going out in case there are any delays in getting your invoices paid, this way you can limit the effect a late payment could damage your own cashflow and that of your suppliers.
Work below your means
If you read any articles on ‘how rich people got rich’ or along those lines, most of them will state that living below their means played a huge factor in their financial success. The same could be said for business. You don’t need to have the best offices, the best computer technology or the best staff incentives, especially if you’re a start-up. Start small, and work your way up. It’s better to pay good money for good staff that can grow your business than to splash out on luxuries for the sake of your image. Working below your means and slashing your outgoings as much as you can leaves more money to nourish your cashflow and protect your company with a ‘rainy day fund’.
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