Three tips for improving your business cash flow

Cash flow might sound like a scary accounting term, but it’s just the money coming in and going out of your business. If that money doesn’t keep flowing in, the outgoings keep us awake at night. Indeed, cash flow problems are the reason why most small businesses fail. This doesn’t need to happen to you, though.

In this post, I’ll share three tips for keeping the money flowing into your business.

1) Get Your Timing Right

Often, we tend to invoice in clumps. Rather than billing a client when the project finishes, we wait till the end of the month. Although this can be more efficient, it means the money comes in much later. Invoicing more frequently, e.g. weekly, or invoicing after every job gives you a steadier income stream.

I run a lot of workshops for a major client. Sometimes this involves 5-6 events per month, and I invoice after each event. This is extra admin for me (and them), but it reduces the risk of late payment. As a very large company, sometimes their finance system has a spasm and it takes several months for me to get paid. If it’s a few hundred pounds, I can cope; if it’s a few thousand, it’s very disruptive.

2) Implement a Late-Payment Policy

There are often good reasons for late payment, but in other cases your client is struggling with their own cash flow problems. As a small business, you can charge a fee and interest if payment isn’t made by your deadline. You might feel uncomfortable with implementing this policy. However, often it’s enough to simply state the policy on your invoice and be prepared to politely remind the client of its existence.

I’ve heard much evidence to suggest debtors prioritise invoices that include a late-payment policy.  You probably don’t need to send in the heavies.

Take a look at my blog post on How to Get Paid as a Freelancer or Small Business for suggested wording and details of the penalties you’re allowed to apply.

3) Part-invoice in advance or at milestones

Cash flow is particularly tricky with big projects. They can last months, then it’s at least another month before you see any money. If there are obvious milestones – points at which you deliver part of the agreed outcomes – you could invoice for the work completed so far. This also makes it easier to maintain momentum.

Perhaps you’ve spent a lot of money on materials for the project? It’s worth negotiating some upfront money from your client.

Advance or milestone payments improve your cash flow and also mitigate the risk of non-payment. If your client gets into financial trouble, at least you have some of the money. Negotiating these terms might feel awkward, but it’s a lot less awkward than chasing an unpaid invoice.


In summary, here’s how to keep the cash flowing in:

  • Create a continuous income stream by invoicing weekly or even daily
  • Devise a late-payment policy and implement it
  • Break down larger projects into smaller chunks and invoice throughout

As with anything, getting into a routine can help. Setting aside just 25 minutes a week could ensure the cash is flowing and that you’re not experiencing a blockage. Creating a cash flow system reduces stress and allows you to concentrate on what you do best.

Catherine Pope

I'm a financial coach who loves Victorian novels, technology, and big books about pensions.

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