As a business owner, you know that you must invest money in your business and clients to succeed. However, that doesn’t mean your bank account should go into a deficit. You should always have more money coming into your business than going out. Keep reading for six tips that will help you maintain a positive cash flow for your business.
Don’t be overconfident when spending money
New business owners often spend too much, especially if they’re fortunate enough to have a fair amount of money in the bank before starting their business. They can feel overconfident and overspend because they start seeing more money in the bank than they’re used to, or they want to make their business look more successful so they buy unnecessary items, like a big office or a fancy car. Be cautious with your money and don’t overspend, even if your business is successful. In business, situations can change quickly and you want to be financially prepared for the future. You should also take into account taxes you will owe when looking at the money currently in your bank account. Consider working with businesses that help with tax preparation in Mississauga or Toronto, like Bookkeeping for GTA. Tax services in Mississauga or Toronto can help you figure out what you’ll owe during tax season.
Consider the amount of time it takes to collect payments
When looking at your business’s finance, don’t get over-excited when you land a big contract. Even your most successful clients may take a month or two to pay their bills. If you’re spending a lot of money on a client’s project and they’re not planning on paying you for a few weeks or months, you may find your bank account quickly emptying. If possible, ask your clients to pay up front, or make a 25% deposit before you start the job, and don’t release the final product until the last payment as been made. If some clients need more flexible terms, don’t be overly accommodating and allow them to take a long time to make payments. You may also want to consider offering incentives to clients if they make early payments, or pay the full amount up front.
Negotiate Your Accounts Payable
Once your business has built up some credibility and you have a positive relationship with your vendors, try to negotiate a payment plan for the items you purchase for client projects. Your vendors may be willing to split your order into three payments that correspond with your client’s payment plan. This will ensure you don’t have to worry about draining your bank account before your clients pay you.
Avoid Late Fees
Paying your bills late will result in late fees, which means more money will be leaving your bank account. Paying bills late may also result in overdraft fees and more interest on loans and credit cards. If follow the first three tips above and avoid overspending, ensure your clients make payments upfront, and you negotiate payment plans, then you shouldn’t run into the problems. However, if you struggle to pay bills on time, contact one of the bookkeeping services in Toronto, like Bookkeeping for GTA. We can help you manage your business’s finances, so you never have to pay another late fee.
Don’t Offer Large Discounts
If you’re barely breaking even on each sale, you have a problem. Your prices should reflect a reasonable amount of profit to compensate for your work. While promotions can be a good way to attract new clients, don’t make your promotions unrealistic or offer them too often. If you do, your customers may come to expect unreasonably cheap prices from you. This mean your clients will start to only make purchases when you’re offering a huge promotion, which will cause your profits will drop dramatically.
Pay Yourself First
Some business owners invest all their money in their business and neglect to pay themselves for their work. While you shouldn’t expect a large salary right away, you can’t work for free. Set a salary for yourself that is reasonable for the amount of money your business makes. Avoid the temptation to use your business as personal bank account instead of paying yourself a salary. Don’t forget to consider taxes when paying yourself, or you might be surprised by how much you owe when the tax man comes knocking on your door. A business that helps with tax preparation in Mississauga or Toronto, like Bookkeeping for GTA, can support your business. Working with tax services in Mississauga or Toronto can help you figure out what you’ll owe during tax season. And if you’re struggling to figure out a salary that works for your business, Bookkeeping for GTA’s small business bookkeeping services can help.
If you’re currently struggling to maintain a positive cash flow for your business, working with bookkeeping services in Toronto that specialize in small business bookkeeping is important for your business’s success. Bookkeeping services in Toronto will save you time and money, and help you avoid potential tax issues. If you need a small business bookkeeping service in the Greater Toronto Area, Bookkeeping for GTA is the right choice. We’re an company of experienced bookkeepers who are devoted to providing your business with professional bookkeeping for financial management and tax preparation in Mississauga, Toronto, or the GTA. At Bookkeeping for GTA, we specialize in medium and small business bookkeeping and tax services in Mississauga, Toronto, and the GTA. We handle all aspects of bookkeeping, from implementing, converting, and maintaining systems, to ensuring your financial information is up-to-date and correct. Make sure your business’s cash flow is always positive by contacting Bookkeeping for GTA today.