As an entrepreneur, your cash flow and cash position are paramount.
Deposits. If you bill for services, collect a deposit of 33 percent to 50 percent up front. Who does this? Landscapers, interior decorators and consultants. Call it a deposit or call it a retainer, but collect it.
Payments. Send out invoices promptly mark “pay upon receipt” or “net 15.” As an entrepreneur, you want to get the payment, which you are owed, quickly. With these terms you can begin collections follow-up in 15-30 days, instead of 30-60 days.
Watch Your Budget.Watch the dollars. Watch the $50s. Watch the $100s. The extra purchase of office supplies, the added of another mobile phone in your network, the money you spent that was not on a budgeted item, blows the budget. The gasoline that gets used because of three separate trips in three days instead of one roundtrip to three stops–that’s where the money goes–overhead costs.
Stick to your budget. If you start drifting over budget, then look for somewhere else to cut next month. It’s discipline and looking at the numbers that keep you on track with expenses.
Carry cash on your budget. Yes, you can have a line item in your budget that’s operating cash reserve. This means you have planned cash to be in the bank, so if your cashflow is slow on collecting payment, you go over budget, or if sales dip–you still have operating cash to keep the business moving forward.
Set a cash floor for your peace of mind. Know your total revenue, total expense and your upcoming sales goals. You have a good sense of your monthly expenses. Before you ever draw on a line of credit, set a floor for how much ready cash you keep on hand to meet expenses.