Cashflow is the lifeblood of any business – if you have no money coming in, you can’t make the payments out that you need to continue trading, from paying staff to buying the supplies you need to operate.
A healthy cashflow is vital not just for the day-to-day running of your firm, but also to fund growth by raising new capital to fund the expansion of the business and hiring new talent. Using contractors is one way to harness talent without being committed to too many expenses.
But it can be challenging to keep the money coming in, particularly if your clients are SMEs - or if you are. To ensure that you are not spending all your time chasing invoices, you need to stay on top of what you owe and what is owed to you. It is important to know key metrics such as how long it takes to get paid after a sale; how long it takes you to pay what you owe and how long it takes for you to turn inventory into sales.
Many professional services firms are on retainers, but if not, customers will take as long to pay you as they can. You can get ahead of the game by billing early, asking for deposits upfront and encouraging them to pay more quickly by offering a discount for early payments.
When it comes to your own bills, the longer you can take to pay, the better it is for your cashflow, but you have to strike a balance between having that cash available and keeping your creditors happy.
With American Express, you can have up to 54 day payment terms1 allowing you to keep your suppliers happy by paying them on time. This can help reduce the need for external financing while giving you a more stable and predictable cashflow.
1. The maximum payment period on purchases is 54 calendar days on Gold & Platinum Business Charge Cards and 42 calendar days on the Basic Business Charge Card, it is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date.