While I am using and reviewing MYOB’s PayDirect card reader and application, MYOB offered to answer some cash flow questions from photographers.
With only half of all new small businesses lasting longer than four years, and recognising sole traders/’non-employing’ small business owners as the least likely to survive, some cash flow tips are no doubt highly sought after. (McCrindle Research, Small Business Nation 2013, 2013)
I asked a small group of self-employed photographers for their questions relating to cash flow and sent them off to MYOB (their answers follow).
Cash Flow Q&A
Jenni: Is there a difference between cash flow and profit?
Yes. Cash flow is the difference between the amount of cash a company receives and pays, whereas profitability is the difference between revenues and expenses. Profitability is the result of accrued revenues and accrued expenses that are recorded with or without accompanied cash transactions. To find out if you’ve made a profit for the year, you look at the bottom line in your P&L (profit and loss) report.
Kelly: How do I know if I have a cash flow problem?
Adequate cash flow is essential to keeping a business afloat however it’s also one of the biggest problems facing small business owners. A cash flow problem is when a business spends more money than it earns. If your outgoings (payroll, rent, supplies etc) is less than what the business is being paid in a month you will have a negative cash flow.
Sam: What tips have you got for keeping my bank balance in the black?
1. Set your payment terms early and stick by them
Research shows it takes an average of 56 days to get paid, and that less than half of invoices were paid within the standard 30 day terms. That’s a lot of valuable cash locked up in unpaid invoices.
2. Send invoices regularly and as soon as work is complete
It seems obvious, but invoice the moment work is complete. Don’t wait until the end of the month or even the week. The earlier you invoice, the sooner your payment terms kick in and your customers will pay.
3. Give your customers more ways to pay you
Make it easy for customers to pay you, and there’ll be fewer excuses as to why they haven’t paid.
If invoicing your customers straight after you’ve finished sounds like a winner, consider adding MYOB PayDirect to your payment options. Turn your smartphone into a card reader, and you’ll be able to take credit card payments on the spot.
4. Follow up on late payers
Even with the best planning, there will be customers who don’t pay. Stay on top of these, and follow up with a polite phone call, a day or two after the due date.
Rebecca: Do I need a cash flow statement?
As cash flow is crucial to keeping a business afloat I would strongly recommend that you track your cash flow with a cash flow statement
Bridgette: I have always had cash flow problems – what am I doing wrong?
If you’re having cash flow problems then it’s highly likely you’re spending more than your business is being paid each month. You should start by tracking your cash flow so you know exactly how much actual money is coming into the business every month. This will help you better manage your outgoings.
Cash Flow forecasting can be tricky for portrait photographers. We have a reasonable idea on which months are quieter – however due to the nature of portrait sessions having a short booking lead-time, it isn’t always easy to forecast what is coming in. Business Victoria have a downloadable cash flow forecasting spreadsheet which can help you track your cash flow and be prepared for 2015!
You can read more about Smooth Flowing Sessions and my MYOB PayDirect experience here, or if you would like more info on getting your own MYOB PayDirect Card Reader, simply add your details here!