So much of the pressure you come under as a business owner relates to money. Sue Keogh of Cambridge digital content specialists Sookio talks through the three finance worries that are likely to keep you awake at night – and how you can avoid them.
The big one – for everyone! – is getting paid on time. If your business comes mostly from just a handful of clients it just takes one or two to be late with their invoices and all of a sudden you have major problems with your cashflow.
The answer is to be proactive, not reactive. Don’t wait for problems to arise, try to avoid them happening in the first place. It’s very time consuming and dispiriting having to chase payments, and not great for your blood pressure either.
So you’ve got to make your terms clear in the contract right from the very beginning and mention the Late Payments Act which entitles you to claim interest and fees on overdue payments. Make sure your bank details are included in all the paperwork. Get confirmation that the invoice has been received. Give people a friendly nudge before it becomes overdue. And if it does go beyond the payment terms, chase hard and chase early. If people think you’re a soft touch they won’t hurry to pay!
Knowing how much to charge is also an issue. Too much and you won’t make any sales! Too little and you won’t make any money! What to do?
There are several approaches you can take here:
Ask the client what their budget is. I know, right, seems obvious! But people get so intimidated by the idea of this, worrying that the client will think all you’ll do is come in at a fiver below the budget they suggest rather than give them a fair price.
But knowing the budget in advance is so helpful in determining the level of service you’re going to provide. I know people who haven’t won a contract because they went in too low and the client thought that they weren’t bigtime enough to deliver what they wanted.
Research the marketplace. What are your competitors charging? Look at current clients and assess which proposals were successful – or not. What is the value to your customer? They may be thinking more about the benefits than the costs.
It’s useful to leave a bit of wiggle room so you can negotiate if your proposal is over budget. So a breakdown of costs is helpful, then it’s clear which bits can be taken away to make it more affordable for the client. But make sure you know what your production costs are in the first place, so you don’t undersell yourself.
The last worry relates to keeping the ship steady. You put a lot of effort into getting new business, but do you look after your customers once you’ve sealed the deal? Sitting back and taking their continued custom for granted can lead to a big shock if they decide to take their business elsewhere.
And if you do have a sudden dip, do you have enough cash reserves in place to see you through in the short term? You may suddenly need access to finance, in which case it’s good practice to always keep your books in good order.
Keeping your books in order will of course help you project a sales forecast so you can spot any trouble lying ahead. Depending on the nature of your business you may want to have a staged payments system so you can be paid during the project rather than waiting until the end.
Looking after your wider admin is important too; for example, accidentally forgetting to sort payroll one month could seriously harm your relationship with your team. If things like this build up you might find yourself being kept awake at night worrying about the cost of recruiting a new member of staff!
Sue Keogh is a Sage Business Expert and founder of Sookio, a digital agency based in Cambridge which specialises in quality content for the web and social media.