One of the biggest killers of small businesses is poor cash flow. It’s a tricky thing to manage, particularly in the beginning but there are many things you can do to increase your odds. As always, QBO has got your back with their new cash flow forecast tool and their auto invoice reminders. Keep reading for your cash flow cheat sheet.

What is cash flow?

I always like to start off with the basics because, really, there are no stupid questions when it comes to keeping your business afloat. So what the heck is cash flow anyway? To put it simply, it’s the cash flowing in (from customers) and out (for payments) of your business.

Why do I need good cash flow?

Positive cash flow is important for keeping your business going. You need cash for keeping on top of debt, for growing your business, and for critical decision making. Your business might have turned a profit but with poor cash flow, your business is doomed to fail. So it’s time to get on top of it. Luckily there are many ways to do this (continue reading below).

How to keep the cash flowing in 3 easy steps:

1. Get your customers to pay you ASAP

Easier said than done, right? Maybe not. The best thing you can do is invoice straight away. Just finished fixing their broken toilet? Stand back, admire your work with your customer and then email that invoice before you even leave their house. They’ll be so chuffed with their working toilet that they’ll be super keen to send that payment through. If you’re wondering how tricky it will be to send an invoice that quickly - well actually, if you’ve got your smartphone or tablet with you, it’s super quick and easy with QuickBooks Online.

The other tip I’ve got for you is to follow up with late payments (or even just before the invoice due date) by sending a friendly reminder. Don’t let your invoice sit in their inbox for weeks on end (or worse, a paper copy lost somewhere in their house!). The longer it’s unpaid, the worse for your cash flow so get on top of it.

2. Take advantage of any discounts on your bills

Is there a pay on time discount? If you can, pay on time and get that discount so you can have less money flowing out of your business. This should be achievable, if you’ve followed my advice in step 1 and brought the cash into your business. Bonus, it’ll keep a healthy relationship with the supplier so next time you need, say, an urgent delivery, they might be more likely to help you out.

3. Reports & forecasting

You can keep an eye on your cash flow by using reports. Keep track of who owes you and what you owe so there are no surprises and nothing gets forgotten. Another handy tool you can use is forecasting. Cash flow forecasting estimates the amount of money you expect to flow in and out of your business within a given time period. This can help you to make better business decisions and identify issues before they come up. If this seems a bit above your paygrade, don’t worry because your friendly, local bookkeeper can help!

How can QuickBooks Online help with my cash flow?

QBO has a couple of handy new features to help you out. Their brand new cash flow forecast tool is currently being rolled out to their customers. Here’s a quick demo vid if you’d like to see how it works for yourself. But basically, it just uses your financial history to forecast where your money might come and go from in the future. It also lets you add or adjust things so you can see what impact you can have on your future cash flow. Brilliant!

Chasing customers for payment is definitely low on most people's list of favourite things to do! It can be an awkward process but you can take the awkwardness out of it by sending automated email reminders with QBO. Set it up so that by a certain date (maybe the invoice due date for example) your customer gets a gentle reminder that it’s time to pay up. You can even attach the original invoice to the email so you can skip the back and forth if they can’t find it.

So that’s all I’ve got for you this month. If you’re interested in better managing your cash flow, getting set up with QBO or how to use the QBO cash flow tools, connect with us today and we can get it sorted!