If you’ve ever attended my business events like Designer MBA, or taken any of my online courses, you know how important I believe cash flow is to small businesses. It’s the one thing that can make – or break – your business faster than any other! But how do you keep your eye on that cash ball while still trying to run your business? I’ve got 5 tips for you:
1. Make realistic projections. Too often we get excited about a new project or idea and we make very generous projections for the amount of income we think it will generate. And if you also plan your expenses against those overinflated numbers, you may find yourself coming up short in future months. I like to project income conservatively and my expenses higher. That keeps me on a worst-case-scenario outlook that allows me to plan for every contingency.
2. Don’t shop. I’ve said this so many times – there are a lot of things that you really don’t need to run your business, like fancy stationery and office gadgets. When I started out over 17 years ago, I spent way way too much on branded tissue paper. And I still have a good supply of it. Keep those purchases to a minimum and think about a cost-benefit ratio for every single thing you consider buying. If it’s going to help you make money, then it’s more likely to be worth it.
3. Make cash (flow) king. You have to have a cash flow budget and you need to watch it like a hawk. I meet every single week with my bookkeeper to go over income, expenses, and cash on hand. If you’ve hit a rough patch in your business, it may not be fun to look at those. But I promise you it’s the only way to get control of your business and correct any issues. And it will keep you out of hot water if your company is in good financial health. I consider this one of the most important things I do for my business.
4. Check your payment system. One thing that can completely derail a business is if your clients don’t pay their invoices on time. I can’t tell you how many designers I’ve consulted with who have had this happen to them. And I get it – it’s tough to run down a late-paying client. You don’t want to insult them and possibly ruin a future business deal, but you also need the money they owe. One thing that I always advise is to get paid before delivery. Otherwise, it’s much more difficult to track down the payment. I always receive 100% of my design fee by the time of the presentation. And I never ever buy any furnishings unless I’ve been paid for them. Have a system for payments – and stick to it.
5. Cushion any fall. Every business should have some sort of emergency cushion – a sum of money set aside that can help you when there is some sort of setback or issue. I know it’s hard to build one of these when you’re just starting out or you’re struggling, but any amount you can set aside for a rainy day is a good idea.
Use these tips to keep your cash flowing and your company in the black!
PS – If you’d like to learn more of my business strategies and ideas to help transform your business, join me this fall for my live two-day Designer MBA event, held Nov. 2-3 in Dallas at the Stoneleigh Hotel!