One of the biggest mistakes I made when I started out in business was this: I did not understand the correlation between healthy cash flow and a thriving business.
I didn’t have a problem getting sales in the door, but I often lacked the skill of proper planning for my cash flow needs. These days, I am adamant about running my business primarily on the cash that I bring in the door. I do not use credit for anything because now I understand how dangerous the careless use of credit can be.
Here are a few of the tricks that I use to run my business completely on cash flow:
1. Understand what your cash needs are.
In our Multiply Your Profits course, we talk about the importance of tracking your cash flow, in and out. My former operations manager even created a detailed cash flow tracker so that we could keep track of cash coming in and out of my business. Keeping an accurate record of how much cash you need and when you will need it, will help the most savvy jewelry business owner get her hustle on.
Understanding what you need makes it really easy to hustle and get the money in the door. Using this proactive attitude helped me insure that I was paying myself a salary every 2 weeks. When I knew my cash flow was dependant on my personal income, I made sure the cash was coming in the door.
2. Take a deposit “up front” from your client.
Especially in a custom business model, taking a significant deposit up front will eliminate the issue of not having enough cash to produce an order. The standard for custom work is to take a minimum of 50% up front. This encourages your client to commit, helps you pay for all of your expenses up front and, hopefully, gives you a little cash in your pocket for your design time.
In the case of a wholesale order, certain clients may be willing to offer a deposit up front in order to receive a small, early pay discount and faster delivery or to develop credibility with you.
3. Invoice immediately and follow up consistently.
Invoicing your clients immediately speeds up the cash flow process. If you are shipping an order out on “net terms,” you want to make sure your client has the invoice as soon as your order ships. Often times, emailing an invoice will ensure payment on actual terms rather than your buyers lagging in payment.
Set a day of the week to follow up on your accounts receivables. If you are extending terms on a regular basis, make sure you are following up on a weekly basis with any of your clients that have overdue invoice. DO NOT feel bad or like you are pressuring them by following up. They agreed to pay you in a certain amount of time, so you have the right to follow up.
The same goes for those of you who still insist on consigning your product. You must follow up at least once a month for payment. If you are ready to ditch consignment, we support you.
4. Process credit cards at the time of order or shipment.
A fantastic way to increase your cash flow is to process a credit card at the time your client places an order or at the time it ships depending on the type of purchase. We encourage you to stay away from, for as long as possible, extending credit to your clients. Instead, have them pay up front with their credit card.
There are certain assumptions, especially if you are selling on Etsy or your website, that you obviously get paid up front.
If your clients resist in the case of a wholesale order, just be insistent that it has nothing to do with them. In order to run you business, you need payment on credit card terms. In most cases: all wholesale.
5. Get rid of excess inventory.
Getting stuck in “bright, shiny object” syndrome can be detrimental to a jewelry business owner. I totally had boxes of unused inventory just sitting around like deadweight. Make sure that you are clearing out your old or dead inventory on a regular basis by selling off raw materials or creating pieces of jewelry that can be sold at a sample sale or in the sale section of your website.
Do whatever you can to liquidate your dead inventory, and FAST! Having your precious cash tied up in a box of beads is taking money out of your pretty little pocket.
We want to hear from you! Tell us the following in the comments below::
1. Which cash flow “method” is your favorite?
2. What are you going to do NOW to increase cash flow in your business??
Is your jewelry biz cash poor? Check out these 5 tips to increase your cash http://bit.ly/190NUu2