Solopreneurs must manage accounts receivable. Here’s an article from Corporate Credit Solutions I thought was worth your time.
Managing money within a business can be difficult for most owners. Some owners can do their own finances, while others outsource their finances. There a few key parts to understanding how to manage account receivable payments:
– Receiving payments from vendors
– Generating and sending out invoices
– Vendor payments
Your Account Receivable department is responsible for your business bringing in the money owed from your clients. When clients hire you, you go out and do the work or deliver the product that the client has ordered. For you to receive your money, you must send your client an invoice. This invoice is created within your Account Receivables.
Once an invoice is sent to your client, your client will usually pay that invoice within 30 days to 60 days. In the current economy, it has been harder to receive payment from clients. Your clients and owners are feeling the economic crunch as much as your business may be feeling it.
Before you do work for a client, do a little research on that client. To make sure that they are creditable for the work you are going to do. If the owner doesn’t have the financing, you can tell them “no.” Don’t bury your business with work that you will not be paid for. Your business will surely fail.
Another way you can run your Accounts Receivable is called COD, or Cash on Delivery. When you do this, it will allow you to be paid by your client when you deliver a product or when you do the work. You can also ask for a small percentage of your contract upfront.
Explain to your client that this will guarantee your work and guarantee that your client has money to pay you. A 20-30% down payment by the customer at the time of the order will pay for the cost of goods. This way, you aren’t tying up too much money from your cash flow when you need to order raw goods and other things.
Keeping a steady balance with cash flow is necessary and essential in order to maintain a strong business. This will prevent you from damaging your business credit since you will be able to make your payments to your vendors on time.
If you choose to outsource your Accounts Receivable, be patient when hiring it out. Do many interviews with many different prospects. You will want someone who understands finances and understands that they will need to help you receive monies owed to you and your business.