Is your bank balance managing you or are you managing your bank balance?

As a Virtual Assistant, I find myself involved in one of the most important aspects of a business, the daily cash flow. And one of the greatest challenges is juggling the balance between money in versus money out.

I find that the first focus in business is on bringing in sales to boost income and increase profitability, which we all are aware is the right thing to do…So…your sales are up, your business is growing and overall, everything is on the up and up, but every month you find yourself scrambling to pay salaries, suppliers, rent etc…and you keep asking “WHY?”

Today, I am sharing 4 tips on how to avoid the last-minute scramble and help the path to smooth cash management:

1.      What’s potting with your invoicing?

Number one solution is checking if your invoicing is going out quickly and on time. I find that quite often, invoicing is on the back-burner because getting the job done is top priority to ensure great customer experience, alas, the longer you take to process invoices, the longer the customer will delay payment. Depending on your product or service offering, there are 3 ways to ensure on-time invoicing:

a.      COD: Making sure invoices are processed on delivery.

b.      Deposit: Requesting a deposit in advance and final payment on completion/delivery.

c.      Retainer: Monthly service provided at a set agreed rate.

All these solutions require management, making sure the invoices go out on time. I find a lot of small/medium businesses don’t always get to their invoicing on time, creating a confusion with regards to what has/has not been invoiced or, even worse, completely forgotten.

2.      What’s happening with your customer payments?

Now that you’re on-time and invoicing is being properly maintained, how are you monitoring that payments have come in and are you following up for payment? While this can be a difficult task, it is critical to ensuring that your bank balance sits in a positive. I know, I know…you have spent all this time building a relationship with your client and now you must ask for money, not nice right?

Here are a couple of easy ideas to make this feel more comfortable:

a.      Approach to begin with in a way that you are “sure” they paid but cannot track the payment: “Hi Joe, I am sure you have already processed the payment for the attached invoice, however, I cannot seem to trace receipt. Please could you forward the proof of payment so I can trace and update my records?” -> this is just one of the starting points I use.

b.      If no response is received, don’t send 300 reminders on email, pick up the phone…90% of the time, they will be self-reactive and apologise profusely for not making the payment and process on the same day.

c.      For your retainer invoicing, we use a reminder before the time process. We make sure invoices are sent out no less than 7 days prior to the due date, and we send a reminder 5 days before and then 1 day before, this helps to keep your payment top of mind and first in their pipeline.

NB!! Check your bank statements every day, before you send follow ups for payment, make sure that the payment is indeed not in your account.

3.      Tracking your expenses – Who’s who in the Zoo

Your daily, weekly, monthly, and annual expenses all need to be tracked and planned into your daily cash movement.

a.      This is something you need track daily, as new invoices come in, they need to be captured into your accounting system and planned in for payment as per the due date.

b.      Once you have processed payments, make sure all relevant tracking reports and account systems are duly updated as well to avoid duplicate payments.

4.      And finally, don’t only plan for today!

Plan your income and expenses for 3 months in advance (at least).

Here is a quick guideline to creating this document:

a.      Start with a simple baseline being income and expenses:

          i.     Income: Expected daily, weekly, and monthly; include items such as your regular adhoc customers; all retainer agreements in place; quotes sitting in your sales pipeline and a baseline of your average daily income (where applicable)

          ii.     Expenses: Anticipated daily, weekly, and monthly expenses; include items like electricity, rent, telephone, regularly used suppliers, planned maintenance expenses as well as planned marketing expenses etc… (remember to also include any expenses that you may have fallen behind on too)

b.      Now work this into a simple, “easy to use” format that you can work on easily and quickly and make sure it is updated daily with where your current bank balance is presently sitting at and what expense and income are due to move.

This document should now allow you to review/revisit contracts with customers and suppliers if/where needed, which will allow you an easier, more comfortable way to manage your cash movement throughout the month.

I hope this helps you to find your feet in managing your bank balance and helping you to meet salaries, rent etc. on time!

Feeling stuck? Need a helping hand to get started? Or do you just not have enough time to do this?

Give us a call and let us help you get you going on managing your money better than ever!