When you run a business, it’s vital to keep a close eye on the money coming in and going out of it. Here are six simple tips to help you stay in control and maintain a healthy cashflow.
1. Make sure your invoices are accurate
We’re all guilty of the odd typo, but try to make sure that you don’t include any in your invoices. If a customer questions an invoice and asks you to send out a new one, it can delay the time it takes for the money to reach your bank account.
To avoid any unnecessary back and forth, double-check that you’ve included the correct items, prices and customer details, and make sure your invoices include everything HMRC requires. Check out our quick guide to what your invoices should include to make sure you don’t run into trouble.
2. Keep your business and personal finances separate
Limited company directors need to have a separate bank account for their business, but there’s no legal requirement for sole traders or partnerships to do the same. However, it’s much easier to keep track of your cashflow if you keep business and personal finances separate - it will give you a clear idea of what’s coming and going from your business rather than from your pocket. For all business types, it’s worth considering the advantages of opening a business bank account.
3. Chase late payers promptly
Chasing customers for unpaid invoices can be both time-consuming and a little awkward, but if you want to maintain a healthy cashflow, it’s crucial. That’s why FreeAgent lets you set up automatic late payment reminder emails for each customer, meaning your invoices will chase themselves while you get time back to focus on more important things.
Depending on the customer, you can also customise the timing and wording of the reminders, so you can take a slightly stronger tone with your late payers when you need to give them that extra nudge.
4. Establish good relationships with your customers
If your customers do pay you on time, it’s a good idea to send them a thank you note to let them know you appreciate their prompt payments. This sort of positive reinforcement is simple, but it can go a long way to ensuring your customers pay promptly when they receive your next invoice. As well as sending late payment reminders, your FreeAgent account can also send automatic thank you emails to customers once you’ve been paid.
5. Review your customer base
Identifying the customers who pay you later than others can help eliminate some of the uncertainty of your cashflow forecasting. It might also make you reconsider working for them again! FreeAgent’s late payment Insight helps by identifying your five slowest-paying customers based on their late payments over the past year.
6. Understand your near-term cashflow data
Having a clear understanding of what the near future holds for your business is crucial to ensuring you make the right decisions about income and expenditure. FreeAgent’s Cashflow feature enables you to do just this by providing data-driven projections about how much money you’re likely to spend and receive in the next 90 days.