Leadership Challenge: Cash flow
Many small businesses struggle with cash flow. It’s not unusual. After all, you didn’t start your business because you like doing paperwork, you started your business because you liked what you did for a living and wanted to do it for yourself, right?
Unfortunately, business owners who are technicians - someone who works IN their business, versus someone who works ON their business, often fail to handle certain management aspects of running a business - like invoicing. Your invoicing processes have a lot to do with your business’ cash flow. If you don’t have cash coming in, you won’t have enough cash to pay your bills.
Invoice on time
It might sound silly, but it’s common for self-employed, home-based, or other small businesses and consultants to wait longer than they should to invoice. As soon as you complete your project, invoice. Don’t wait. You worked for that money and you deserve it. You’re not being greedy, you’re earning a living and your businesses needs operating cash flow! If you have a client on a monthly retainer, make sure your invoices go out on time. If you’re having trouble disciplining yourself to invoice, find a freelance bookkeeper to help you. When I owned my agency, I hated invoicing. The first thing I outsourced was bookkeeping. My bookkeeper was a godsend. Once she took over invoicing, the invoices were more accurate, recorded correctly, and went out on time. Plus, while she was invoicing for me, I could make money doing the client work I enjoyed.
Write strong contracts
When you’re a small business, it can be extremely difficult to get paid on time, especially if you’re lucky enough to have large businesses as your clients. Protect yourself from unpaid invoices by writing strong contracts that clearly lay out the terms of your agreement. Pay a lawyer to help you write your contracts. Yes, lawyers are expensive, but it will be worth every penny. Just because you are a small business does not mean you should work on handshakes and promises. In fact, you should never work on handshakes and promises. It is much easier to discuss payment terms, what happens if deadlines are missed, and what work is and isn’t included in your project BEFORE the project starts. Nobody likes dealing with an angry client. You can avoid a lot of really difficult situations by presenting clear contracts before every project begins.
Having a strong invoicing process will help you avoid the worry of wondering how to get invoices paid. It’s one of the best ways to improve the profitability of a company. You have the right to make a living. Get the payment you deserve. It will improve your cash flow and lower your stress level immensely.
To learn more about writing business processes, I strongly suggest reading The E-Myth by Michael Gerber. Not sure? Check out my blog post, The one business book every entrepreneur should read.