Ensuring your business maintains proper cash flow management is vital for any business to stay alive. A lack of understanding of the funds coming into and out of the company can quickly lead to bad decision-making and, ultimately, failure.
Jason Kulpa, a net worth expert and experienced serial entrepreneur, shares five of the biggest cash flow management mistakes people often make and ways to avoid them.
Delaying an Invoice
While many businesses take the route of being lackadaisical about invoicing clients, it is crucial to stay on top of invoicing your customers. The sooner you send the invoice, the sooner your business will get paid. Most customers aren’t going to play the honour system and follow up with you if they haven’t paid yet. That said, create a process and stick to it. The earlier an invoice is submitted, the fresher the work is in the mind of the customer.
Loose Payment Terms
Some companies make the mistake of offering longer payment terms such as 30, 60, and 90 days. While it is beneficial to the client as they reap the benefits of free credit, your company will be foregoing cash flow for that period. Your business is still incurring bills to keep things running during that time. Instead, it is recommended to offer shorter terms such as two weeks to help keep cash flow steady and predictable.
Failure to Itemize or Communicate with Customers
A common mistake businesses make is a failure to communicate with customers on any cost variances or increases throughout the lifecycle of a project commitment. An invoice should match the original fee agreed upon or at least itemizes services and products delivered. If an invoice doesn’t match what a customer expects, they are more likely to delay payment or refuse payment entirely.
Failure to Follow Up with Customers
It’s essential to follow up on customers who fail to pay on time. Successful businesses create a firm follow-up process for payment and have a regimen to contact customers that have not paid at specific intervals. Kulpa suggests that one way to avoid this failure is to utilize a cloud-based invoicing system that enables your business to schedule automated follow-up messages, notifications, and emails to customers late on payments.
Complicated Payment Process
Businesses that fail to provide an online payment system or have convoluted or complicated payment processes quickly create a barrier to receive payments on time. When an invoicing system is seamless and smooth, customers are more likely to pay faster and on time. Only providing options such as mailing a physical check or bringing cash to an office can hinder response times and make customers less likely to pay.
About Jason Kulpa
Jason Kulpa is a serial entrepreneur, net worth expert, and the Founder and CEO of UE.co, San Diego’s Fastest Growing Business multi-year award winner, and a Certified Great Place to Work multi-year winner. Mr Kulpa is a San Diego’s two-time winner of the Most Admired CEO Award of the San Diego Business Journal and also a semi-finalist for the Ernst and Young Entrepreneur award. Under Mr Kulpa’s leadership, in 2018, his teams volunteered at over 24 events and worked side-by-side to improve the San Diego community. They hosted a gala dinner benefiting individuals with autism, cheered on Special Olympic athletes as they broke their records on the track, and brought school supplies and cold-weather gear to students impacted by homelessness. Jason’s mission is to bring awareness, support, and inclusion for special needs causes.