7 No-Brainers for Improving Small Business Cash Flow

It's time to get out of your own way and improve your cash flow. These 7 easy-to-implement practices will show you the money.
Columnist, American Express OPEN
April 10, 2013

When you’re running into problems with cash flow for your small business, one thing is certain: It’s not a problem with your customers. It’s a problem with you and how you’re handling your business finances.

I sat down late last year and decided that my business was never going to have a cash flow problem again. It was time for me to get out of my own way. Since that time, the results have been astonishing. Here are the 7 no-brainer moves I made to improve the cash flow for my small business. They’re all moves I wish I’d made sooner.

Admitting You’re the Problem

It’s easy to blame our customers or clients for not paying us on time. So easy, in fact, that we ignore the reasons we can’t access the cash we need, when we need it. When my clients weren’t paying me on time, I knew there was only one fix for my cash flow: putting structure in place to ensure I was running my small business like a business. I was the only reason this hadn’t happened, and I was the only person who was going to be able to fix it.

Creating Structure

I’d had an online invoicing program for over three years, but what I hadn’t been great at is treating the business side of my business with equal importance. It’s easy to get sucked into the work and ignore getting paid for the work. Here are three ways I created a financial infrastructure for my day-to-day business activities. They’ve all drastically improved my cash flow.

  • Commencement Deposits: Depending on the service, I charge anywhere from 50 to 100 percent of the project fee to get on my calendar. My customers have never complained and it demonstrates goodwill from both sides—I’m ready to start for those customers ready to pay.
  • Invoicing Practices: When I deliver the final component of a project, I invoice immediately. Not once a week, not once a month—when something is delivered. We have to pay for most everything else in life when we purchase it or take delivery—why do we treat the services we provide for others differently? I also set up recurring invoicing for retainer clients. I don’t have to do anything—the invoices are sent to my clients automatically.
  • Weekly Status: Every Friday at 11 a.m., I open my invoicing dashboard and review what’s paid, what’s pending and what might be late. I end my week smiling at what’s dealt with and still smiling knowing that I’ve followed up on all my loose ends.

The Beauty of an Arm’s Distance

My personal and business bank accounts used to be at the same bank. On January 1, 2013, that changed. With my business and personal accounts now completely segregated, I have even more incentive to keep up with my invoicing. If I don’t, I can’t run payroll and I won’t see any money in my personal bank account when I want to take that weekend trip to the mountains. Talk to your CPA about payroll options for your small business. Cash flow is a breeze since my own CPA made the  recommendation to move my business account, and I know my taxes, health insurance, retirement savings and other deductions are automatically dealt with. Arm’s distance? I’m loving the distance.

RELATED: 6 Invoice Tricks to Get Paid Faster

Getting Help

Speaking of a CPA—get one. I also got a bookkeeper. While I was able to take care of my business’s finances, none of it jazzed me. Now I have a bookkeeper I pay about $100 per month to keep my business finances in line (and he’s jazzed about this). He talks to my CPA (also jazzed about dealing with my business finances), who’s charged with keeping my taxes paid and offering advice on the most favorable strategies for my revenue levels, annual sales and growth goals. My CPA has also given me invaluable advice on Health Savings Accounts (HSA) and retirement plans for small businesses like mine. Now contributions to both my HSA and SEP IRA (self-employed IRA) are automatically deducted from my bank accounts, eradicating two more excuses from my small-business lexicon.

Embracing Resources

Having used the same online invoicing solution for over three years (a fantastic service called Harvest), my sales volume has increased to a point where I needed a more robust solution. I also wanted one that left Paypal out of the equation, as I was tired of getting paid and then having to manually initiate a transfer to my bank account. I personally opted to switch to PaySimple (full disclosure: it's a client of mine), as it was the right solution for my transaction volume, how my clients prefer to pay (checks and credit cards), and sent all payments direct to my bank with no middleman. You can also check out online invoicing and payment solutions from FreshBooks and WePay.

RELATED: Can't Pay Your Taxes on Time? New Options from the IRS

Eradicating the Headaches

Some clients will never (ever) pay on time. Knowing this, I was faced with two choices: get rid of the slow paying ones or make it worth my while for them to pay in their own sweet time.

Given that I truly love working with all my clients (I’d already long ago purged the ones who were more headache and less awesome), I established early pay discounts and late payment penalties. Now I’m offering a reward for those slow-to-pay clients that step to the plate and pay early. I’m also getting paid for waiting when they go beyond our agreed upon payment terms. Either way, I get paid. And now I’m getting paid early more often than not.

Be Willing (Because You’re Ready and Able)

Remember that phrase “ready, willing, and able”? When it came to cash flow in my small yet rapidly growing business, I was ready and able. The willing part needed some work. I knew how it felt to have my business finances all willy-nilly, wondering where all the money from my growing business was really going. Today, I know down to the penny.

Once I was willing to make the change, money started landing in the bank and flowing effortlessly where I needed it to go: bills, contractors, expenses, payroll, savings, healthcare, retirement. Being willing made it possible to enjoy owning a small business. That’s a welcome change after six years of being ready and able to make my cash flow worries a thing of the past. And yes, I called these 7 tips “no- brainers”—but before I implemented them, they were anything but. Here’s to combining ready, willing, and able and putting these no-brainers to work for your business.

Read more articles on business finances.

Photo: Getty Images

Columnist, American Express OPEN