Managing cash badly is one of the main reasons for business failure. Any time you spend working out your cash needs and monitoring cash flow is time well spent. By doing this, you can:
- Find out when you might not have enough cash before it happens
- Find out when you might make extra cash and use it efficiently
- Make sure you have enough cash for any necessary capital expense
- Find out how to use your resources more efficiently and reduce costs
Also, think about the period of credit you allow your customers or get from your suppliers: don't let your customers get too far in debt to you, or you won't be able to pay your own bills. Try to impose the same terms on your customers as you get from your creditors.
And remember: cash flow includes your own salary, capital spending, VAT, taxes and loans, as well as all cash you will pay and receive.
"I have a wall year planner that a friend made for me out of recycled nappy liners. Every time I send an invoice out, I put a little smiley face on the date. Then, if I don't get paid for ages, I put a little frowny face over the top to remind me to get cross when I phone up. But the best thing I can think of is to call sooner rather than later and try to stay friends. They are my customers, after all."
