Bookkeeping tips to help you build a solid financial foundation for your business.
A while back I came across a startling statistic:
What in the world is cash flow?? It's the cash flowing in and out of your business [basically income and expenses].
So what are cash flow problems and how can we solve them?
Overestimating future sales: estimating that you'll make $10k next month when you only made $1k this month and aren't actively growing your business. Solution: be realistic. Base your future numbers on those of the past and the work you’re willing to put in.
Impulse buys: spending money before thinking it through and budgeting. Solution: ask yourself if this expense is necessary and if you can actually afford it at this stage of your business. New businesses will have different priorities than those who have been around for five years. Don’t compare your business purchases to others. Create a budget and stick to it no matter what everyone else is doing.
Ignoring overdue invoices: pretending they don't exist because asking people to pay can be awkward! Solution: have clear deadlines on your invoices and policies if payments are late. For example, invoices that are unpaid after the due date are subject to a 5% late fee. I also recommend stopping work if someone’s invoice remains unpaid for 30 or more days.
Keeping a low balance in your bank account: transferring all your money into personal accounts. Solution: set up a business savings account. It is helpful to save enough money to cover 2-3 months of business expenses. This will help you get through slower times in your business. And if you need to buy something like a new computer or camera you’ll be ready!
Don’t let cash flow problems bring your business down.