Since I started editing Flying Solo one issue has emerged as the number one thing the small and micro-business owners in the FS community are really struggling with: cash flow. And lord knows I feel their pain. I remember those days of bad cash flow all too well.
Back then I prided myself on the fact that we were never more than a day or two late to pay anyone – but still, it was incredibly stressful and I lost a lot of sleep from all the worrying I did.
Well we’re more profitable. And that definitely helps! But that’s not the reason we’re in a good cash flow position.
Back in the day (when I was doing all the books), we invoiced monthly because that was all I could manage. So say it was May and we finalised a job on May 2nd. That job wouldn’t get invoiced until June 1st. If that client paid on time (14 days), we got the money for that job on June 15th. That’s 44 days between the job being finished and us being paid for it.
And that’s if the client paid on time.
If they didn’t, who knows when they would have got a reminder. It really depended on how desperate we were for cash. Some months I wouldn’t send a reminder till I did the invoicing for the following month! Crazy in retrospect but I suspect this is the same for many business owners out there – when you’re trying to do everything yourself, you prioritise the most urgent thing at the time. And usually the most urgent thing is getting client work done.
So what changed?
Well we got a Jan. Jan is Ant’s mum and here are the two things she does for us that make all the difference to our cash flow:
As soon as a job is finished, we close it in the system. And once a week (instead of once a month), Jan invoices out all the jobs closed from the previous week.
Now, as you can imagine, this is not a fun job. But it’s a necessary job because:
My mum (yep, we employ both mine and Ant’s mums in our business!) does our accounts and she is constantly amazed at how few invoices we have sitting in the 30+ day range. I can’t even begin to tell you how amazing this is for our business operations and the freedom it gives both from a stress point of view, but also from an operational point of view. (It’s been my experience that when a business is experiencing cash flow stress, they tend to make decisions based on scarcity and fear.)
But I realise not every business has a Jan. So what can YOU do to ease cash flow stress?