Having a properly designed budget in front of us, we are able to see where worse times may await us. When predicting problems with maintaining financial liquidity, we can think about appropriate security in advance, e.g. a company loan, working capital loan, leasing, or factoring. Such financial tools, including a loan for the company, will certainly help maintain the stable finances of our company, even in more difficult months.
Anticipate Unplanned Expenses
Having an outline of the company’s finances, it is much easier to determine whether if we have to incur unplanned expenses, we will be able to afford them. Even if our company works flawlessly and profits grow accordingly – you have to think about various unforeseen complications. We should have a financial tools cushion for such situations.
In months when we have higher revenues, we should save money for the next worse months. Such matters seem obvious to everyone, but only a small percentage of small business owners confirm that they always have a financial tools reserve.
Negotiate Deadlines In Your Favor
The very long payment terms of invoices are a real bane, especially for small businesses. From the 31st day, i.e. from the date of delivery of the invoice, you have the right to calculate statutory interest as fees for the so-called trade credit. Of course, this is not a solution to the problem of extended payment terms, but at least partially it will allow you to finance the losses incurred by the company.
A very good way to speed up payments is to offer customers discounts in exchange for short-term payments of invoices.
Avoid Unnecessary Expenses
When starting a business, you can often come across temptations. Beautiful, designer accessories for the office, the latest equipment … incurring such costs is very pleasant, but they do not bring adequate income afterward. So let’s fight such temptations and buy things that we really need at the moment. You will definitely benefit from this approach.
Check Your Contractors
If despite your repeated requests, the money still does not reach the company’s account. And a request for payment can be sent to the customer. However, in order not to lead to such situations, we can introduce a few routine activities to our company. It will help us check new customers before starting cooperation.
The easiest way to check is to review the opinions about given companies on the Internet or check them in debtors databases. Interestingly, such things are not done by many companies. It is a pity because such a small habit can really protect the company from many problems.
Face Tough Decisions
Clients are different. There are often situations where the customer wants long payment terms and ultimately fails to meet them. Don’t be afraid to ask for your money in such situations. If the payment deadline has passed 7 days ago – sometimes a regular phone call to the customer is enough.
Also remember that you are entitled to statutory interest on each overdue payment. And a lump sum fee for expenses related to the recovery of receivables. However, it is best to use these options as a last resort, in the case of clients with whom we will not have any more contact.
Give Up Insolvent Contractors
Many small business owners claim that even half of the invoices they issue are not paid on time. Some of these companies are afraid of asking for overdue receivables. That do not want to lose their clients in this way.
In such cases, it is worth considering whether we really want such contractors in the further environment of our company. Running a business is the art of making really difficult business decisions. The better the decisions are made, the fewer the negative impacts on your company’s liquidity will be.