One area every small business must keep a close eye on or risk losing control is management of cash flow. What follows are some important tips to help you stay on top of managing your cash flow.
Track your cash flow monthly on an Excel spreadsheet so you can see trouble before it arrives and those annual expenses like insurance, taxes, licenses, etc. that bite a big sudden hole in the cash flow.
Manage your customer credit carefully, a full-blown credit application that you then get a credit report on to see their payment practices is very helpful and without it you'll guess wrong a lot.
Give clients a reason to pay on time, whether it's the classic 2% discount for payment within 10 days of billing or 1.5% monthly interest on balances over 60 days is helpful. Making sure bills go out in a timely fashion (tougher than it sounds) and are accurate as well as detailed enough to show the customer value received.
Keep evaluating your pricing, underpricing or not charging at all for very real costs is a classic reason for bad cash flow but very hard to spot.
Watch how you pay your suppliers closely. The classic tip is to stretch them out until they scream but antagonizing or harming your business partners is just stupid when you think it through. Being the client who pays fully and promptly is huge leverage, being the slow-pay/no-pay is a terrible negotiating position for getting anything done.
Continually evaluate your overhead costs, consider them "broken" instead of "fixed". It's amazing what waste creeps in there and gets paid without further analysis. Meaningful value to what you're actually doing is key, paying for capacity you're not using is a common trap.
Watch for people who balance convenience vs cost the wrong way (and it can go either direction, wasting hours to save pennies is common enough too.)