Build A Cash Pool For Your Home-Based Business By Following 7 Simple Rules
by Laurie Hayes
Although your income statement might
show a healthy profit, it doesn't amount
to a hill of beans if you have no cash flow.
One of the biggest mistakes made by new home business owners is allowing clients
and customers to buy now and pay later. In other words, extending credit.
Credit is for banks and large corporations, not for you as a home-based
entrepreneur.
Cash flow is the lifeblood of your business. Without it, your business will wither
and die regardless of how many sales you've made or how much money is owed to
you.
Cash flow represents the amount of money coming in to your business through
services rendered and products sold, and money going out to cover expenses and
production costs.
Your primary responsibility as a home-based business owner is to ensure the flow is
consistent with more money coming in than going out so a pool starts to form to
hold the overflow. This overflow is what allows you to make early payments so you
can benefit from vendor discounts, to take advantage of special deals, capitalize on
newfound opportunities, and easily cover unexpected emergencies. As soon as cash
flow fails to produce the surplus funds you need, challenges arise and stress and
overwhelm quickly follow.
Integrate these seven simple rules to your operating strategies and enjoy the benefits
of a steadily growing cash pool.
1. Request payment prior to delivering your product or service.
If your service is delivered over an extended period of time and asking for a
one-time payment in advance isn't realistic, divide the payment into segments and
request payment in advance of each new time frame.
For example, if you provide weekly house cleaning, consider requesting payment at
the beginning of each month in advance of providing your services - or suggest three
or six months payment in advance and offer a discount as an incentive. A mere 10
percent discount over a three-month period could put an extra $100 or more into
your client's pocket. Many will jump at that deal.
2. Pay every bill on time to avoid late payment charges and earlier only if special
payment discounts apply.
As a hair stylist working primarily with cancer patients, imagine spending one
thousand dollars a month on wigs. If the supplier offers 2/10, net 30 as payment
terms, you will save two percent by paying your invoice within ten days. That might
only be $20, but over a year, it adds up to $240.
Take advantage of this incentive with every supplier that offers it and you could
keep thousands of dollars in your business that you would otherwise have spent.
3. Deposit payments as soon as you receive them.
Instead of making one or two trips to the bank each month, make them daily or
weekly. Letting checks lie around increases the risk of loss. Also, go to a teller when
making your deposit. Using an ATM machine removes any evidence you deposited
real cash or checks. An employee or technical error or internal theft could create
problems you simply don't need.
4. Use a business credit card whenever possible for travel, meals, and minor
expenses.
This leaves more cash in your hands and defers payment. Using a card that awards
travel miles also helps you cut future travel costs. I've enjoyed cruises and free
flights to business conferences thanks to air miles.
5. Create continuity sales.
Build a product or service into your business that your client could use on a
continual basis. For example, if you run a bookkeeping business and your clients
struggle with cash flow, recommend bank reconciliation services every month.
Many clients hand a box of receipts to their bookkeeper at the end of each year and
cross their fingers hoping they did well. Helping your clients understand exactly
where they are each and every month is an exceptional service that many will jump
at. One client at $30 a month would give you $360. Ten clients at the same amount,
paid in advance would give you $3,600 cash at the start of the year.
6. Create something that allows you to do the work once, but profit from over and
over again.
For example, many of today's business owners are creating e-books (electronic
books) and audio recordings sharing valuable tips, information and knowledge that
improve the health, happiness and prosperity of others.
Selling electronic products online removes production costs and provides a steady
flow of funds into your business.
7. Invest your overflow.
Once you have built a comfortable overflow, consider investing some of it to make it
grow even faster for you. Letting a large sum of money sit in your bank account does
nothing to accelerate growth. Talk to an investment professional and find out how
you can make that money work for you.
Start with these seven simple rules and get creative. Brainstorm ideas for special
offers, continuity programs, passive revenue streams and investment possibilities.
Get input from professionals, mastermind members and your coach. You can do it.
They can help.
About the author: Laurie Hayes is the expert and visionary behind The HBB
Confidential, a no-cost bi-weekly ezine for home-based business owners. Each issue
delivers simple strategies you can use right away to build a profitable home
business while creating fun and freedom in your life! Go to The HBB Source to learn
more.
by Laurie Hayes
Although your income statement might
show a healthy profit, it doesn't amount
to a hill of beans if you have no cash flow.
One of the biggest mistakes made by new home business owners is allowing clients
and customers to buy now and pay later. In other words, extending credit.
Credit is for banks and large corporations, not for you as a home-based
entrepreneur.
Cash flow is the lifeblood of your business. Without it, your business will wither
and die regardless of how many sales you've made or how much money is owed to
you.
Cash flow represents the amount of money coming in to your business through
services rendered and products sold, and money going out to cover expenses and
production costs.
Your primary responsibility as a home-based business owner is to ensure the flow is
consistent with more money coming in than going out so a pool starts to form to
hold the overflow. This overflow is what allows you to make early payments so you
can benefit from vendor discounts, to take advantage of special deals, capitalize on
newfound opportunities, and easily cover unexpected emergencies. As soon as cash
flow fails to produce the surplus funds you need, challenges arise and stress and
overwhelm quickly follow.
Integrate these seven simple rules to your operating strategies and enjoy the benefits
of a steadily growing cash pool.
1. Request payment prior to delivering your product or service.
If your service is delivered over an extended period of time and asking for a
one-time payment in advance isn't realistic, divide the payment into segments and
request payment in advance of each new time frame.
For example, if you provide weekly house cleaning, consider requesting payment at
the beginning of each month in advance of providing your services - or suggest three
or six months payment in advance and offer a discount as an incentive. A mere 10
percent discount over a three-month period could put an extra $100 or more into
your client's pocket. Many will jump at that deal.
2. Pay every bill on time to avoid late payment charges and earlier only if special
payment discounts apply.
As a hair stylist working primarily with cancer patients, imagine spending one
thousand dollars a month on wigs. If the supplier offers 2/10, net 30 as payment
terms, you will save two percent by paying your invoice within ten days. That might
only be $20, but over a year, it adds up to $240.
Take advantage of this incentive with every supplier that offers it and you could
keep thousands of dollars in your business that you would otherwise have spent.
3. Deposit payments as soon as you receive them.
Instead of making one or two trips to the bank each month, make them daily or
weekly. Letting checks lie around increases the risk of loss. Also, go to a teller when
making your deposit. Using an ATM machine removes any evidence you deposited
real cash or checks. An employee or technical error or internal theft could create
problems you simply don't need.
4. Use a business credit card whenever possible for travel, meals, and minor
expenses.
This leaves more cash in your hands and defers payment. Using a card that awards
travel miles also helps you cut future travel costs. I've enjoyed cruises and free
flights to business conferences thanks to air miles.
5. Create continuity sales.
Build a product or service into your business that your client could use on a
continual basis. For example, if you run a bookkeeping business and your clients
struggle with cash flow, recommend bank reconciliation services every month.
Many clients hand a box of receipts to their bookkeeper at the end of each year and
cross their fingers hoping they did well. Helping your clients understand exactly
where they are each and every month is an exceptional service that many will jump
at. One client at $30 a month would give you $360. Ten clients at the same amount,
paid in advance would give you $3,600 cash at the start of the year.
6. Create something that allows you to do the work once, but profit from over and
over again.
For example, many of today's business owners are creating e-books (electronic
books) and audio recordings sharing valuable tips, information and knowledge that
improve the health, happiness and prosperity of others.
Selling electronic products online removes production costs and provides a steady
flow of funds into your business.
7. Invest your overflow.
Once you have built a comfortable overflow, consider investing some of it to make it
grow even faster for you. Letting a large sum of money sit in your bank account does
nothing to accelerate growth. Talk to an investment professional and find out how
you can make that money work for you.
Start with these seven simple rules and get creative. Brainstorm ideas for special
offers, continuity programs, passive revenue streams and investment possibilities.
Get input from professionals, mastermind members and your coach. You can do it.
They can help.
About the author: Laurie Hayes is the expert and visionary behind The HBB
Confidential, a no-cost bi-weekly ezine for home-based business owners. Each issue
delivers simple strategies you can use right away to build a profitable home
business while creating fun and freedom in your life! Go to The HBB Source to learn
more.
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