Maintaining a positive cash flow is essential for freelancers and small businesses because without a positive cash flow, you’ll likely struggle to keep the business afloat. In short, if your outgoings are more than your income, you won’t be able to run your business at a profit and will probably find it challenging to make ends meet during lean periods (especially if you haven’t got a buffer fund in place).
Here are 5 things you can do to help maintain a positive cash flow and get paid on time.
1. Know your accounts receivable and accounts payable
To optimize cash flow and be aware of exactly what’s going out and coming into your business at any point in time, you need to be familiar with the accounting terms accounts receivable and accounts payable.
Accounts receivable (AR) is all the money due to you for goods or services provided. The sooner you can collect this money, the stronger your cash position. That’s why it’s important to send invoices on time and not let unpaid overdue invoices go unnoticed. Unpaid invoices cost you money! Slow payers mean you could miss paying your vendor bills, and you lose out on an asset that could be used for your business.
Accounts payable (AP) is the amount you owe or is due to vendors, suppliers, etc.
It’s important to pay bills as soon as they are due to avoid late payment fees and interest charges. It also helps to keep relationships professional and friendly. You can even set up calendar alerts to remind you when bills are due. By maintaining good relationships with vendors, you can negotiate more favorable conditions with them. For example, you could ask to extend the due date to align with when you know your invoices will be paid, thus allowing you to pay your bills strategically, again strengthening your cash flow.
Keeping up to date with your AR and AP reports will help keep you on track and nip any problems (such as slow payers) in the bud as soon as they arise.
2. Make it easy for clients to pay you
To make it easy for clients to pay you and, therefore, avoid any potential late payment, you can make use of invoicing software that integrates with the world’s most popular payment gateway providers.
Payment gateways enable you to accept credit cards and other electronic payments online directly from invoices you email to your clients.
Invoice Ninja, a leading free invoicing software for freelancers and small businesses, offers multiple popular payment gateways to choose from. Integrating your Invoice Ninja account with a payment gateway allows clients to pay their invoices with 1-click! The payment gateway processes the transaction in the background, while your client never leaves their Invoice Ninja client-side portal. You can set up more than one gateway, giving your clients extra convenience and choice in how they pay your invoices.
Try Invoice Ninja for free at the link here.
3. Consider charging for late payment
To motivate prompt payment of your invoices, consider charging late payment fees on overdue invoices. Naturally, you should let clients know in advance in your freelancer payment terms and conditions that you charge for late payment. Your freelancer terms and conditions should always be clear from the outset, and your invoices easy to understand.
With Invoice Ninja, you can set up invoice late payment fees that apply automatically when invoices pass their due dates. You can set up late payment fees as a percentage of the invoice or as a flat monetary value.
4. Send payment reminders
Payment reminders can be an excellent prompt to get your invoices paid on time. You can send out automated professional reminders before, on or after they are due to help reduce delinquencies.
With Invoice Ninja, you can create custom email reminders based on the invoice date or invoice due date. You can define date parameters to remind your clients before or after invoices are due to ensure timely payment. You can set ‘First, Second, Third’ or ‘Endless’ reminders to ensure invoices are not overlooked.
When it comes to getting your invoices paid, early intervention and consistent follow-up are key.
5. Get payment upfront
One way to ensure you are paid on time and have money in the bank is to get payment upfront.
This can be a partial or full deposit (100%).
Getting a deposit or down payment from clients before you commence work is standard practice for many freelancers. And some apply milestone billing, where you get paid at specific intervals throughout the project and the final payment at the end.
With Invoice Ninja, you can set up a partial payments/deposits feature on your invoice.
After your client pays the partial payment, the invoice will automatically update with the balance due and set the new final invoice due date. You don’t need to do a thing apart from sit back and get paid.
See all of Invoice Ninja’s small business and freelancer-friendly features to help you get paid faster here.
