Small businesses need a constant amount of cash flow to pay off day-to-day expenses. Therefore, you need stringent billing practices in place to ensure that more money keeps flowing in than out.
Use the following billing practices to keep your small business healthy:
Ask For a Deposit
This method normally works if you are making something exclusive for customers, like an industrial product or clothes. You could ask for 50% to 60% as an advance, so that if the customer backs off after placing an order, you don't end up with dead inventory.
However, this strategy will not work if you are offering off the shelf products or if you are in a high competition market.
Shorten Credit Periods
If a high credit period is leaving you cash-strapped, then reduce the credit period so that you free up much-needed income.
For new customers, quote lower credit periods. Over a period of time, slowly lower credit periods for existing customers so as to reduce the chances of bad debt.
Get Your Invoices Factored
Invoice factoring is where factoring companies buy off your invoices and collect the invoice amount from you for a nominal fee. They will pay you almost the entire amount immediately, thereby immediately improving your cash flow.
Research a good factoring company's services to find out if this financial tool is suitable for your business.
Use Good Accounting Software
Nowadays, a variety of reasonably-priced software is available to help you in keeping track of your receivables once you have sent out an invoice. Use them to keep track of your customer's payments, and nip any late paying customers in the bud. These software applications can also useful in sending out billing reminders.
Use the above billing practices to maintain a constant cash flow – and watch your small business flourish.