How do I ensure that I don’t have a problem with my cashflow?

It is a known fact that it isn’t profit that kills a business, it is cash flow, as without this, you cannot pay bills, or invest in things to continue operating. Therefore it is vital to ensure that your cash flow is as robust as possible. Simply put, you need to have more money coming in before it goes out and therefore this means that your terms of business need to be robust. For example, if your customer pay you on 30 day terms (i.e. you invoice them and then they pay 30 days later) this may work well unless the costs you have to pay to provide that service, to your suppliers, have to be paid before then. Now after time, if you have built some cash reserves, you can afford to do this to a degree, providing that the difference is not too big, however while you are setting up it may be difficult to operate in this way. It is important that you work out your average profit for your product or service (based on your customers average spend) and ensure that your customer is paying you before your suppliers demand payment from you. This is a good general rule to work to, however it is also good to ensure that you credit check clients in advance of working with them, especially if the value is high, to ensure that they can afford to pay you – you don’t want to deliver the goods only to be faced with a customer who doesn’t or cannot pay. If you are concerned about this happening, it is a fair request to ask for some or all of the payment, up front, but be aware that some customers are unwilling to pay for a service without seeing at least the work begin.

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