3 Ways To Manage Income Flow for Small Businesses and Freelancers

Cash flow is the lifeblood of any business. Without it, you'll be unable to pay your bills and employees. And without employees, you won't have a business!

But what exactly is cash flow? Is it all the money you have in your bank account? Nope. Cash flow refers to how much money comes into your company minus how much money goes out of your company.

Cash flow is essential because it's a measure of how healthy your business is – meaning that if you're not generating enough cash, then there's something wrong with your business, and you need to fix it ASAP. The most common causes of low cash flow are:

• not having enough customers
• not selling enough products
• too many expenses
• unpaid debt

Let's look at a formal way of defining what cash flow is;

What is cash flow?

Cash flow measures the net amount of cash and cash equivalents coming into and going out of a business over a set period. It indicates the financial health of your business by showing how much cash your business has on hand.

One of the reasons why most Small Businesses fail is that they don’t have enough cash at hand.

Cash flow management is one of the most important aspects of running a business or being a freelancer.

Let us look at 3 ways you can effectively manage your cash flow.

Pay off Your Debt

A lot of businesses spend too much time without paying off their debts, which may lead to an increase in interest rates and a bad credit score.

This can also create a negative net income.

Negative net income is the result whenever the value of debts or liabilities is greater than the value of the assets. Your business can have a positive cash flow but report a negative net income, due to expenditures and debts.

Paying off your debt will ultimately give you finical freedom, one less thing to worry about, and allow you to grow your business and contribute to stable cash flow and savings.

Identify your revenue streams

Revenue streams are the various ways in which a company earns money through the sale of goods or the provision of services.

Identify and categorize your products and services that are profitable and those that are not. This is an important stage, since knowing what works will help you make better business decisions about which items or services to invest in.

Furthermore, knowing exactly how much money you make—and where it comes from—is always a smart idea.

Let's imagine you earn X per month and spend Y on rentals, debt repayment, operations, and internet payments. You have to answer at least the following questions to check if your business or income streams are profitable enough:

Is your current source of income sufficient to cover your expenses?

Do you need to look into other revenue streams, and maybe diversify?

Or do you need to drop some products/services to save money and time? (this in some cases can save your business).

Make Sure To Get Paid On Time

Late payments have ruined a lot of businesses and freelancers. You end up incurring more debt to keep your business running or spend from your pocket. Getting paid on time is very significant to any business.

Late payments will cause cash flow problems. Unless you are a B2C retail shop, you need your clients to pay on time.

And one way of making sure you are paid on time is by sending your invoices on time and clearly stating your payment terms.

This becomes much more convenient if you are using invoicing or accounting software.

Invoicing software will handle most of your invoice tasks for you, from sending invoices n time to sending reminders on overdue invoices. From tracing your expense, bills, and payments to generating reports. This is the most recommended choice for small businesses and freelancers.

If you are a growing business with a lot of employees, you may need dedicated accounting software may be the right choice, unlike invoicing software, they come with a lot of features for handling a lot of accounting and legal issues for you.

Conclusion & Next Step

A lot is missing here, but these are the basics for most small businesses, solo enterprises, and freelancers. Pay your debt, keep track of your income flow, and get paid on time.

If you are a small business or freelance and don’t mind trying new software, give Qyri a try and provide feed. I would like to hear from you.