Video Production Business Tips – Cash Flow Management Tips for Videographers

The key word in the phrase “cash flow management” is “management.” You have to be methodical and persistent when it comes to how you solve your cash flow problems each day. Most inexperienced entrepreneurs think that the only way to improve cash flow is to generate more sales. Not so. There are some simple steps you can take to improve your cash flow position right now, without increasing sales.

Here’s the plan:

1. Write down the current balance in your business checking account.

2. Write down how much money you owe in payroll and bills for the next 2 weeks.

These are your current liabilities as of today’s date. (I pay my employees every two months so I focus on two-week intervals regarding amounts due in both payroll and business bills.)

3. Subtract today’s liabilities from today’s bank balance.

This is your “cash flow balance” as of today’s date. Hopefully, your cash flow balance isn’t a negative number. If it is a negative number (and it many cases it will be), it means that within 2 weeks, you’ll have to pay more in payroll/bills than you currently have in the bank. Does this mean you have to pick up the phone and start making cold calls until you make a few sales? NO.

All this will do is frustrate you to no end and you’ll be pursuing business out of desperation instead of with a cool, confident and calm head on your shoulders. Acting out of negative emotion will only cause further damage.

Here’s how to “manage” the cash flow you have before worrying about making any additional sales.

4. Think about what bills are due in the next two weeks that absolutely have to be paid in two weeks.

Will you suffer in any way if some or all of these bills are put off by a week or two? I don’t recommend making late payments on loans that may affect your credit like your bank loan, equipment loan, etc. but you can postpone payment to some of your vendors like freelancers, print shops, internet service providers, etc.

Holding a check for a couple of weeks is often all you need to get back on track unless your sales pipeline is empty.

I’m not a big fan of being late on bills; however, remember that you are in business to make your life better, not the life of your vendors. They play an important role but you have to look out for the health of your company first. After all, if your company isn’t healthy, there is a good chance that you won’t ever have the money to pay a vendor. It’s in their best interest to work with you when you need help. Just do your best not to ever abuse it. And, don’t be afraid to call them before the bill is due to tell them that you will be a little late. Usually all they need is a phone call so they aren’t worrying on their end why you haven’t paid your bill.

Still not convinced that this is okay to do? Think about all the times your clients are late paying you. Sometimes it’s because the invoice is misplaced. Most of the time it’s because their bean counters are doing the same drill I’m revealing to you in this post and waiting until everything is in balance before they cut your check. So don’t feel bad but try not to abuse it.

5. After you’ve determined what bills can be postponed, look at your receivables.

Which clients currently owe you money and who do you expect should pay in the next two weeks? Pick up the phone or send an email immediately requesting the status of payment for the invoices that are due right now as well as for the ones that are scheduled to be due in within two weeks.

For the second group, tell them that you are looking at your books for the next two weeks and want to know if you can count on their check arriving before the end of the 30-day period. In the process of checking the status of your payment, they will be forced to find your invoice in their system. If they find it, they’ll often try to push it through to make sure it’s paid by the time it’s due.

If they can’t find it, they’ll let you know and you can send them another copy of the invoice immediately. (Note: If you email your invoices, keep a copy of the email so you can verify when the email was sent. Also, ask the client to confirm receipt with a return email. Same goes for faxes.) This will give you a leg to stand on when you ask that they push through the invoice you are sending them today so that payment can still be made on or before the original due date.

6. After dealing with the payments that are due to you now, look at the payments that are due beyond two weeks for work that has already been completed.

Then, pick up the phone or send an email asking if it is possible for them to go ahead and cut you a check. You’ll be surprised at how many of your clients (especially satisfied clients) will be happy to oblige. Others will ask for a small percentage discount if they go ahead and pay early (around 2-3%). If/when this happens, you’ll just have to analyze if you want to give up the percentage in order to get your hands on the cash sooner. I can honestly tell you that in 10+ years of running my video business, only two clients have asked for a discount if they paid early. The other clients have either declined my request or paid it without requiring a discount.

7. The next step is to look at what sales proposals are out there but need to be followed up on.

Follow up with every prospect and ask if there is anything you can do that will help them decide to move forward with the project. Sometimes it’s as simple as lowering your price a few hundred dollars or offering more DVD copies at the conclusion of the project.

Other times, they are confused about a section of your proposal but haven’t taken the time to call you about it. Once you solve their issue, they’ll be closer to signing your contract. And, in other cases, they’ll indicate that they never received the proposal at all and were wondering why they hadn’t heard from you. Regardless of the scenario, any positive action in this area will move you further along in the sales process.

8. If you have exhausted the steps above and it doesn’t look like there is anything you can do to get your hands on enough cash to get you through the next pay period, it’s time to start looking at your lines of credit.

Do you have a business line of credit? If not ask your banker about setting one up. Do you have equity in your home? If so, talk with a couple of banks or mortgage companies about taking out a home equity line of credit. Regardless of how you do it, only draw enough cash needed to get you through to the next period. When you get the checks in, pay off the line immediately. Treat this kind of debt very seriously. It can bail you out when you need it but it can also cripple you if you use it before taking all the steps listed above. Don’t use your line of credit as a crutch!

If you don’t have access to lines of credit, start thinking about how to secure one right now. Call a few banks, talk with local successful business people to get ideas, etc. A line of credit can often be the difference between producing videos for another couple of weeks or shutting your doors.



Source by Kris Simmons

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