Cash Flow Tips for Your New Web Business

June 29, 2011

One of the most common reasons businesses fail is because of cash flow. Cash flow is defined as the amount of money being transferred into and out of a business. Put more simply, it is the ability to pay your bills when they’re due.

It sounds like something that would be easy to manage but little things can set it off. For example, if your clients pay when services are delivered and it takes you 45 days to deliver then any bills you receive in the interim may go unpaid. What happens is people turn to credit and loans to pay those bills. Then the cash flow problems snowball. Stay free and clear from cash flow problems. Follow these simple cash flow tips for your new business.

#1 Collect money owed to you right away. Make your invoiced due upon receipt. There are ways you can motivate customers to pay quickly by offering discounts and incentives. You can also charge late fees if they pay late. If you’re a service provider you might also request a 50% deposit up front. Many service providers do this and most of your customers will expect it.

#2 Pay your bills as late as possible. By all means don’t incur fees by paying late but don’t pay them right away either. Hold onto your cash as long as possible and keep it in an interest earning account.

#3 Create a budget – and stick to it. It’s easy once the money starts coming in to think that you have more than you really do. There’s a tendency to both give yourself a higher paycheck and to spend more money than you have on things like marketing and outsourcing. Once the profits start coming in, revise your budget to reflect the increase in income. Add a new element to your budget called “Savings.” Save for months when cash flow is tighter.

#4 Don’t borrow money. Borrowing money to start and grow your business can cause serious financial strain and cash flow problems. Instead of borrowing money, brainstorm ways that you can make more money faster. For example, information marketing can be a great way to generate fast income.

#5 Barter, partner, and trade to get things done. Instead of paying for services and products to grow your business, think outside the box. Barter and trade with service professionals. Partner with relevant and complimentary business owners to help each other grow and prosper.

Cash flow is the lifeblood of your business. Appreciate it. Take great care of it and make cash flow planning and analysis part of your business week. Staying ahead of your cash will help you grow and create the business of your dreams.