During the starting phase of any business, entrepreneurs and their employees are working around the clock. And if there’s a cash crunch, it’s essential to know why? The obvious answer for most entrepreneurs is insufficient cash flow. You could be doing good business annually, with little phases of a cash issue.
Some entrepreneurs accept the situation. While there are others, who decide to resolve the issue of short funds. Some of the smart steps to implement include:
- You must carefully vet clients
Every entrepreneur loves to make sales. Closing any business deal is useful when you’ve gathered the money that you earn overtime. When someone is eager to hire your company for a profitable project, you should suggest working on a small project to start with and the move over to other challenging ones.
Make use of the small project to assess the payment. If a client pays $500 over 120 days, you might not want to get into a big project with that person. It’s a smart call to search for another client instead. It will help in streamlining the cash flow better.
- Make your client base diverse
If you have only one client to count your payment and profits, you are at a vulnerable situation. You will automatically have a cash crunch. Just in case the client decides to slow down activity, you will not be making money to sustain your business. The best way is to diversify your client base. Make sure to work for two or more clients, so that even if one slows down work, there are others to support your work and cash-flow.
- Assign a third-party to manage your client payments
The other way to minimize the risk of delayed payments is onboarding a couple of your clients to freelance platforms! Even though these platforms might take a small cut, it will provide scopes for you to get paid for the projects completed regularly. It manages the payment collection effectively.
When you search online, you will come across several such platforms, with interesting payment options. Hence, it will resolve your payment issue and gradually your cash-crunch problem as well.
- Negotiate contracts correctly
Smart entrepreneurs always ask for a substantial deposit up front on a project along with progress payments. Instead of billing for the entire project back end, an upfront deposit is beneficial. Also, when you are working as a retainer, you need to place the invoice at the starting of the month and set a week’s due date. A small business might not be able to finance projects for clients. Hence, it is essential to ensure that you are doing the same minimally.
Do you work in a domain where asking for a deposit isn’t common? Do your clients take 30 or more days to pay? In such a situation you can offer them a discount for early payment. Some companies look for such offers.
The cash crunch is never the right place to be! Smart entrepreneurs always have ways to take their company out of it, sooner or later.