The story of your life, as told by your bank account: it's all good feelings and world domination when several clients send a check at once. But if multiple projects get stuck in limbo or you run out of work, it's Anxiety City, population: you.
But an unpredictable account balance doesn't have to rule your IT business. By following these simple cash flow tips, your business can feel less like a financial roller coaster and more like a relaxing round of mini golf.
1. Dedicate Time to Business Development
When you’re scrambling to get all your client work done, carving out time for prospecting may feel like a luxury you can’t afford. However, if you don’t regularly seek out new clients, you may find yourself out of business altogether, say money management experts.
“You can’t just get into a find business / do work cycle,” says
Denise O'Berry (@deniseoberry), a
small business expert and author. “To stay in business, you’ve got to keep a steady stream of prospects moving through your company.”
O'Berry offers three tips:
- Always have new prospects and repeat clients moving through your business sales funnel.
- Never stop looking for that next business opportunity.
- Dedicate at least 25 percent of your time to developing future business.
“The first step in breaking the cycle of feast and famine with workload and cash flow is giving yourself permission to step back from the daily grind to make sure your own business is running smoothly,” says
Josh Norris (@joshnorrisjxn),
CPA, CFP®, and managing member at
“If business owners don’t take the time to take care of their own business, they won’t be around long enough to take care of clients,” he says.
2. Automate Simple Tasks and Bookkeeping
While the personal touch can go a long way in building customer relationships, automating processes behind the scenes will save you a lot of time.
“Use a task management system so you'll remember to follow up with a client, check in about certain projects, or even send prospects a quick email on their birthday,” says Carrie Smith (@carefulcents), a financial writer, business consultant, freelance coach, and founder of the blog Careful Cents. “No more forgetting important client requests or letting prospects slip through the cracks.”
Chasing after customers for money is one of the most frustrating and time-consuming tasks for a small IT business owner, so the more you can put your billing on autopilot, the better.
“I personally use, and always suggest using, a bookkeeping or invoicing service,” says Smith. “Many of the programs available today have mobile apps so you can keep track of all your billable hours on the go, record receipts for reimbursement, and even set up recurring invoices and payment reminders,” she says.
3. Set Up a Cash Flow Budget
A cash flow budget is an easy way to stay on top of when money is expected to come in and when bills are due.
“Forecast and track your cash inflows and outflows,” says O’Berry. “Knowing where you might fall short of cash helps you address the issue before it becomes critical. Your best bet is to plan your budget on a 12-month basis so you have plenty of time to correct any shortfalls before they occur.”
Not sure how to create a budget for your business? O’Berry has a cash flow budget template on her website that can help you keep tabs on your income and expenses.
4. Offer Clients a Variety of Ways to Pay
Want clients to pay you on time? Make it simple, and if possible, give them a couple ways to pay their bill.
“Automate billing and make it extremely easy for clients to pay you,” says Norris. He adds that many accounting programs let you email invoices and allow customers to pay with a credit card.
“Small-business owners often have more tools than they realize when it comes to encouraging their customers to pay on time,” says
George Kyriakis (@geokyr),
director of business development for
(@freshbooks), a cloud-based accounting software company. Kyriakis suggests setting expectations early for when bills are due by giving customers a specific due date.
O’Berry recommends collecting small payments throughout the course of a project to keep cash coming in on a more regular basis. “Set up milestones for payment and collect along the life cycle of the project. If the customer doesn’t pay, you stop work.”
Discounts can also be an effective strategy for encouraging clients to pay before the due date, according to Smith. “Offering clients a variety of payment options and a small discount incentive can help you get paid faster,” she says. Read more about the power of discounts in our article “Offer These 4 Payment Plans & Watch On-Time Payments Skyrocket.”
5. Build a Cash Reserve
This may seem daunting when you're first starting out, but the sooner you can build up your business’s nest egg, the easier it will be to focus on running your business, not whether you can afford to pay your electric bill.
“The anxiety of worrying about your bank balance is a distraction from work and makes you less productive,” says Norris. “So pay yourself less than you are able in order to create a ‘war chest.’ Not only will this reserve prepare you for unexpected expenses, but it will also allow you to take advantage of unexpected opportunities.”
Be sure to also read "Setting Prices for a Profitable IT Business" and "5 Bookkeeping Mistakes to Avoid in Your Small IT Businesses" for more tips on managing your business’s finances.
About the Contributors
George Kyriakis is the director of business development for FreshBooks, cloud accounting software designed exclusively for service-based small-business owners. His specialty is in channel, sales, and marketing leadership, and during the course of his career, he has spent nearly 25 years developing channels, global alliances, and working with partners from all over the world.
Josh Norris, CPA, CFP®, is a managing member of LeFleur Financial, a tax practice and investment advisory firm in Jackson, Mississippi. He received a degree in both accounting and international studies from the University of Mississippi, then began his career with Ernst & Young in Memphis. He later moved back to his hometown where he opened his CPA firm, Corkern & Norris. In 2015, he created LeFleur Financial, a fee-only investment advisory firm, which allows him to provide more extensive financial services to his clients.
Denise O'Berry is a small business expert who helps overwhelmed solopreneurs and micropreneurs take the right action to improve their cash flow. Denise is the author of Small Business Cash Flow: Strategies for Making Your Business a Financial Success, a practical guide about keeping the cash in your business – where it belongs.
Carrie Smith is a financial writer, business consultant, and freelance coach. After paying off $14,000 of debt, she quit her accounting day job and launched CarefulCents.com. In the past five years, it’s grown into a blog and community aimed at helping freelancers overcome financial mountains and build successful client-based businesses. When she’s not writing about finance and geeking out over numbers, she enjoys painting, sketching, and making food with her chef husband.