Right now, entrepreneurial spirit amongst kids is high. Almost one third (32 percent) of children in the UK say that when they grow up they want to own a business of their own. Typical childhood dreams of becoming an astronaut, firefighter or zookeeper have been replaced by aspirations of becoming a blogger, app developer or web designer.
With poor cash flow management cited as the reason why two thirds of small businesses (65 percent) fail in the first five years of trading, we are calling for budding kid-trepreneurs to be taught basic cash management skills so that cash flow issues can become a thing of the past.
To help kids survive in the big, wide world of business, we have launched a new campaign to make cash flow child’s play. With a simple instructional video and an easy-to-follow guide full of top tips for how to get paid on time.
So what’s the answer to getting paid on your terms? There are two simple processes you need to keep in mind.
State your payment terms clearly and in advance
If you’re on the phone with a client or for our younger business men and women, discussing chores with your dad and you want to be paid in 14 days, tell them your terms are 14 days and follow up confirming this in writing. Here’s a simple checklist on payment terms:
- Find out what your client’s standard payment terms are.
- Double check. If they say “30 days” that may mean end of the next full month after your invoice is in the system. Therefore an invoice sent on 14 January will be paid on 28 February. To some accounts departments, that’s 30 days.
- If your terms and the terms of the client do not match, negotiate.
- Confirm any variation in writing and make sure the accounts department is aware of it.
- When you invoice, remind the accounts department of any variation in your terms.
- If you’re a subcontractor you may have to wait until the end client has paid their bill. This isn’t ideal and should be made clear to you in advance.
Make it easier to pay
Remove as many barriers as possible and you are far more likely to be paid as per your terms. According to our research, the most common payment methods from small businesses are; 20% cash in hand, 10% by cheque and 10% using online payment services like iZettle, PayPal, or Stripe.
If you can’t take payment by some methods, just make this clear from the offset. You can also make your invoice payment-friendly by including as many details as possible. Additionally include sort code, account code, SWIFT, IBAN and perhaps even a pay now button like PayPal directly on your invoice. Then they can click straight through and pay with a card. Simple!
Click here to find out how to make managing cash flow child’s play. You can also watch our video on the top five rules to follow to put you and your small business on the path to success.
The post Tips for tomorrow’s business owners: Define your payment terms and make it easy-peasy to pay appeared first on Xero Blog.